HMO conversion of auction property for first-time landlord, OL7

Client circumstances:

Our client was a first-time buyer and first-time landlord who had recently purchased a residential property at an auction with cash, through their limited company where they were the sole shareholder. They intend to convert the property from two flats into a six-bed HMO and rent it out. However, they needed immediate short-term funding for the renovation works. Wanting to proceed quickly, their broker contacted our bridging finance team.

MT Finance solution:

Many lenders can be wary about lending to first-time landlords, but we take a commonsense view of an application and consider the client’s plans for the property.

Our underwriters instructed the valuation the day after the enquiry was received and we obtained the report a week after. In just 22 days, we completed a first charge heavy refurb bridging loan of £78,000 at 47% LTV of the property’s open market value of £165,000. The term was set at 12 months but if the renovation is completed before then, we don’t charge any exit fees or ERCs, so the client won’t face any financial penalties for exiting early.

The benefits:

Thanks to our commonsense approach, we quickly provided the client with the funds they needed to convert their property into a profitable HMO. The borrower now has up to 12 months to undertake the works and, as the works fall under permitted development rights, they will not need to spend extra time or money on applying for planning permission. Once complete, they will exit our bridging loan and switch to a buy-to-let mortgage, based on the property’s gross development value of £370,000. The client will then rent the property out and start to generate a monthly rental income.

Find out more:

If you would like to learn more about our heavy refurbishment bridging loans or if we can support your client with an alternative specialist finance product, we’d love to hear from you. Either email or fill in our online form and a member of our team will contact you shortly.