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Newly established SPV purchases two HMOs from trading Ltd Co

Newly established SPV purchases two HMOs from trading Ltd Co

We were contacted by a broker whose clients – a married couple who were looking transfer ownership of two of their rental properties.

Just over a year ago, the couple – both directors of a development company had purchased a redundant care home and since converted it into two four-bed HMOs. Both properties are now being let to students.

Wanting to keep their development and rental businesses separate, the couple wanted to transfer ownership of the two HMOs to their newly established SPV.


In real terms, property cannot be ‘transferred’, so this would be treated as a sale from the trading company to the SPV (also known as a related transaction).

The couple plan to use the funds released from the sale to begin their next development project. 

Keystone’s Classic Range has flexible criteria that accepts related transactions and HMO property.

Unfortunately, the valuation came in below the clients’ estimate, which affected the maximum loan amount, but happy with the valuer’s comments the clients were happy to accept the following terms:

Property value: £170,000 each

Loan amount: £127,500 each

LTV: 75%

Rate: 4.19% 5 year fixed HMO

Term: 25 years interest only

RTI calculation: 125% @ 4.19%

Mortgage payment: £453 pcm each

Lender arrangement fee: 2% (£2,550) added to each loan

Rental income: £2,080 pcm (first property)

     £1,972 pcm (second property)

 

Gross yield: 14.7% pa (first property)

        13.9% pa (second property)

Broker proc fee: 0.6% (£1,530)

 


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