A large detached house was purchased and converted into three separate flats in London

Purchase Price - £500,000

Project Cost - £100,000 

(A) £350,000 - Clients Deposit

(B) £9,045 - Cost of Bridging Loan (5 Month Project)

(C) £4,875 Lenders Arrangement Fee (which can be added to the loan)

(D) £750 - Legal Costs

(E) £1200 - Valuation Cost 

(F) £15,000 - Stamp Duty Land Tax (SDLT)

(1) Total Input From Client (A,B,C,D,E & F)- £380,420

(2) Loan Required - £250,000 (£150,000 for the deposit & £100,000 for the works)

(3) Value of Property Once Finished (GDV) - £800,000

Pre Tax Profit (3 minus (1 & 2) = £169,580

A detached house was purchased which needed a renovation as it was in a state of disrepair and needed new bathrooms, a new kitchen and other remedial works. 

Purchase Price - £100,000

(A) £25,000 - Clients Deposit

(B) £20,000 - Project Cost

(C) £4,326 - Cost of Bridging Loan (6 Month Project) 

(D) £1,462 - Lenders Arrangement Fee (added to loan)

(E) £650 - Legal Costs

(F) £450 - Valuation Cost 

(G) £3,000 - Stamp Duty Land Tax (SDLT)

(1) (A,B,C,D,E,F & G) = £54,888

(2) Loan Required - £75,000 (£75,000 for the deposit & £0.00 for the Works as these were self funded by the client)

(3) Value of Property Once Finished (GDV) - £150,000

Pre-Tax Profit (3 minus (1 & 2) = £20,112

Instead of selling the property the Client instead decided to keep the property for 2 years as a Buy to Let

Buy-to-Let Rate from 1.65% Per Year

Buy to Let Remortgage after month 6

Market Value £150,000 

Bridging Loan to be repaid £76,462 (£75,000 + £1462 Lenders Arrangement Fee)

Rental income £700 pcm (5.6% Rental Yield)

New loan £112,500 (75% LTV of £150,000)

Additional funds raised/Capital raised £36,038 (This money was put back into the clients bank account)

Free Valuation

£600 Legal Cost

£995 Arrangement Fee (added to loan)

1.65% 2 Year Fixed

£156.05 Monthly Mortgage Payment (interest only)

So to conclude:

This means the client only effectively put in £20,445 for the whole project (£54,888 - £36,038)

They then had an Asset worth £150,000 producing a rental income of £700 per month

Due to the Fact the Client refurbished the property in the beginning, the clients initial contribution was £54,888 for the initial purchase and refurbishment of the property.

After the buy-to-let remortgage was finished the client had spent an additional £1,595 remortgaging the property on to the buy to let mortgage. This brings the total contribution including the remortgage to £56,483. 

During the remortgage process, the client decided to withdraw the value they had added to the property of £36,038 by doing a the Capital Raise as the property was now valued higher at £150,000. These funds which were raised were intended to be used towards another property purchase. 

For perspective, if you had instead just immediately bought a £150,000 investment property (not doing any refurbishments), you would normally require a deposit of at least 25% which is £37,500 including additional Stamp Duty cost of £4,500. This would total £42,000 before any mortgage costs had been added. If you factor in Mortgage costs used above this would be approximately £43,595 in total.

So because the client capital raised £36,038 from the property after it was refurbished to use towards their next property acquisition. This means the above strategy would have resulted in a saving of at least £23,150 on a property now worth £150,000.  

A client bought a property close to the a University. This was a 4 bedroom detached house which was converted into a 7 bedroom HMO with full planning permission (Sui Generis) including a HMO License.

Purchase Price - £300,000

(A) £75,000 - Clients Deposit

(B) £30,000 - Project Cost

(C) £12,098 - Cost of Bridging Loan (6 Month Project) 

(D) £4,387 - Lenders Arrangement Fee (added to loan)

(E) £1250 - Legal Costs

(F) £1200 - Valuation Cost 

(G) £9,000 - Stamp Duty Land Tax (SDLT)

(1) (A,B,C,D,E,F & G) = £132,935

(2) Loan Required - £225,000 (£225,000 for the deposit & £0.00 for the Works as these were self funded by the client)

Rental income expected: £3500 Per Month (£42,000 per annum - 10% Yield)

It is important to know there is potentially two different valuations for this property. 

Please see our HMO section for more details.

Bricks & Mortar (Vacant Possession Value)

(3) Value of Property Once Finished (GDV) - £380,000

Pre Tax Profit (3 minus (1 & 2) = £22,065

Commercial Investment Valuation

(3) Value of Property Once Finished (GDV) - £420,000

Pre Tax Profit (3 minus (1 & 2) = £62,065