I thought I would share a short case study of how I helped Max, a first time buyer, first time landlord, to get on the property ladder recently.
Max is aged 21, and although he has managed to establish his own hairdressing business it’s still early years with his net profits currently below £15,000 pa. He happily lives at home with Mum and Dad and despite having limited savings, still dreams of following in his grandmothers footsteps and owning an investment portfolio of several properties before eventually progressing to purchase a home of his own.
Great intentions, however, a number of factors were standing between Max and his dream. Although there are many buy to let lenders who stipulate no minimum income, they usually require applicants to own an existing property and have a deposit of at least 15% of the purchase price. Max was unable to meet either of these conditions.
So what was the answer? Max’s grandmother, whom I mentioned earlier, is in her seventies and has substantial equity in the four properties she has owned and managed over the past 30 years. Fortunately she quite liked the idea of using one of her properties to help her grandson.
The solution was to refinance an existing property, raising enough capital to fund the deposits for several new purchases. Age was not a problem as I have access to several lenders that will lend to age 85 and beyond.
Once we had raised the deposits, we were then able to complete on the first new buy to let purchase which was done in joint names between Max and his grandmother. Six months following completion Max is now classed as an experienced landlord by a number of lenders. This enables further buy to let purchases to be arranged in his sole name with the required deposit being gifted each time to him from his grandmother. This structure is also very useful for Max’s grandmothers estate planning.
Some brokers are overly reliant upon sourcing systems, all of which would have left Max frustrated. Other brokers turn deals down without exploring opportunities and applying creative thinking, I’m not one of them. Creativity doesn’t just mean the difference between a deal being accepted or rejected, it can also make a huge difference to the profitability of a transaction.
If you are looking to raise finance it would be great to hear from you.