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Investors capitalise on undervalued property

Over the last six months the impact of Covid-19 has caused a lot of disruption to the UK property market. With a great deal of uncertainty surrounding the future of the market, many investors are looking to quickly unload their unwanted assets before a possible crash in house prices makes it difficult to sell.

Meanwhile, those investors looking to take advantage of the recent rising property prices are targeting vendors in need of a speedy sale and negotiating discounts for a quick closing.

However, most high-street lenders will not fund properties based on the purchase price- a major hurdle for those looking to buy property below the market value.

We have certainly seen a rise in enquiries from property professionals looking to secure finance for below market value properties over the last few weeks- with many requiring significant renovation before being let out or sold on for a profit.

As an example, we were recently approached by a client who was looking to purchase an investment property at undervalue, for £134,000. The property required a substantial amount of structural work and as the asset was below the market value and not habitable, he was struggling to raise funds from a high street lender.

We provided a £120,000 bridging loan at 60% LTV, based on the open market value of £200,000. As with all our loans, there were no early repayment charges or exit fees.

By taking out a bridging loan, the client had the funds they needed to complete the purchase within the timeframe required and the 12-month term will allow him time to carry out the renovation works. Once the works are complete, he plans to put the property on the market at the higher value, benefiting from the increase in value between the purchase price and the current market value, and redeem our loan.

MT Finance will lend up to a maximum of 65% LTV of the open market value, or 90% of the undervalue purchase price, whichever is the lower figure. What’s more, we make lending decisions on a case by case basis, using common sense to assess transactions. We do the extra due diligence to take the necessary steps and assurances required from the buyer as well as the seller.

To find out more on how we could help you raise funds for your below market value purchase, please don’t hesitate to contact a member of the MT Finance team on 0203 051 2331 or fill in our contact form, and someone will be in touch shortly.

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