Property investment can be incredibly rewarding, but when it comes to specialist buy-to-let (BTL) financing, the path can be more complex. Investors looking at properties above commercial premises, multi-unit freehold blocks (MUFBs), short leases, or properties in need of refurbishment often find that standard financing options simply don’t apply. These types of investments typically require tailored financing solutions that address their unique characteristics. Whether you’re an experienced landlord or a new investor, understanding the nuances of specialist BTL finance is crucial to securing the best deal.
In this blog, we’ll take a look at four key types of specialist BTL properties and how the right financing options can help you maximise your investment potential.
- Properties Above Commercial Premises (Takeaways and Restaurants Below)
Properties located above commercial premises, such as takeaways or restaurants, can present unique challenges when it comes to securing a mortgage. Many high-street lenders are hesitant to approve BTL mortgages for these properties due to concerns about the business operating below, particularly regarding noise, odours, and the potential volatility of the commercial tenant.
How We Can Help
Specialist lenders, however, are often more flexible and focus on the overall viability of the investment rather than automatically dismissing it due to the mixed-use aspect. Lenders who specialise in these properties assess factors such as tenant demand, rental yield, and the long-term potential of the property. We work with a panel of these specialist lenders, who are willing to offer up to 75% loan-to-value (LTV) for properties above commercial premises. With access to the right lender, you can still secure competitive interest rates while ensuring that the property’s commercial element is adequately taken into account.
- Multi-Unit Freehold Blocks (MUFBs)
Multi-unit freehold blocks (MUFBs) consist of multiple self-contained units under one freehold title. This could be anything from a small block of flats to a larger building with several apartments. Standard lenders often shy away from financing these properties because they are seen as more complex and carry the perceived risk of void periods across multiple units.
How We Can Help
MUFBs can offer excellent rental returns as each unit can be let out individually, significantly boosting the yield potential. Specialist lenders understand the dynamics of these properties and are more comfortable providing tailored mortgage solutions. Typically, LTV ratios for MUFBs range between 65% and 75%, but it is possible to go higher with certain lenders depending on the property and your portfolio size. We can help you secure financing that takes into account the higher rental yield and potential for scale, making MUFBs a lucrative part of your property portfolio.
- Properties with Short Leases
Properties with short leases—usually below 80 years—are another area where standard lenders tend to tread carefully. As the lease term shortens, the property’s value decreases, making it a higher-risk investment. In particular, leases under 70 years are often considered too risky for many high-street lenders.
How We Can Help
Specialist lenders are more accommodating of short leases, recognising that investors often have plans to extend the lease and add value to the property in the future. We work with lenders who are willing to offer financing for properties with leases as short as 60 years, or even less in certain cases. Some lenders may require a lease extension as part of the mortgage agreement, while others are willing to lend without an immediate extension, particularly if there is a clear plan for extending the lease in the future. We can help you secure financing with up to 70-75% LTV on a short lease property, guiding you through the process and ensuring that your investment grows in value over time.
- Properties That Require Refurbishment
Investing in properties that require refurbishment can be an excellent way to add value and boost your rental income or resale potential. However, many traditional lenders are reluctant to offer mortgages on properties that need significant work. This can be frustrating for investors who see the potential in turning around a property in poor condition.
How We Can Help
For properties requiring refurbishment, we can assist in securing refurbishment BTL mortgages, which are specifically designed for properties that need upgrading. These mortgages usually come in two phases: an initial loan for the purchase of the property and then further financing, or a remortgage, after the refurbishment is completed. LTV ratios vary depending on the extent of the refurbishment, but it’s possible to secure up to 75% LTV on the initial purchase. Once the work is complete, many lenders will revalue the property and allow refinancing at a higher value.
Additionally, bridging finance can provide short-term funding to cover both the purchase and renovation costs. Once the property is up to a lettable standard, we can then help you transition to a standard BTL mortgage.
The Current Market: Stats and Trends for 2024
In 2024, specialist BTL financing continues to see robust demand as more investors diversify into complex properties. According to UK Finance, buy-to-let lending reached £50 billion in 2023, showing a marked increase from previous years as landlords seek higher-yielding opportunities amidst rising borrowing costs. With interest rates still elevated following the Bank of England’s base rate hikes, the cost of borrowing has become a key consideration for investors, making it even more crucial to explore specialist financing options.
For specialist properties like MUFBs and refurbishment projects, gross rental yields often outperform traditional single-unit lets. Current market data suggests that gross yields for MUFBs can reach as high as 7-8%, compared to the average 4-6% yields seen in standard BTL properties. This highlights the potential for higher returns when investing in more complex assets, provided the financing is structured appropriately.
Let’s Get Started
Specialist buy-to-let properties offer tremendous potential, but having the right finance in place is key to unlocking their value. Whether you’re looking at a property above a commercial unit, a multi-unit freehold block, a short-lease property, or one in need of refurbishment, our team is here to help you find the best financing solution.
At [Your Company Name], we work closely with a range of specialist lenders who understand the intricacies of these properties and are willing to offer flexible, competitive terms. Get in touch with us today to discuss your property plans, and let’s secure the finance that will help you turn your investment ambitions into a reality.
This guide aims to simplify specialist BTL finance and provide you with the knowledge to confidently invest in complex property types. While these opportunities can be lucrative, the right financing is essential—let us help you find the perfect solution for your property investment.
