Maximising Leverage for Distressed Multi-Unit Purchase

What was the situation?

Our client – and investor with a small property portfolio – approached the team looking to secure the maximum leverage possible on bridging finance to acquire a block of 6 flats in South Yorkshire. This opportunity arose from a distressed sale situation, with the properties being sold by a receiver after the original developer ran out of time and defaulted on their loan.

Although the units were structurally complete, they required some finishing work, including minor snagging repairs and the installation of white goods to prepare them for the rental market.

What was the issue?

The first challenge for LDN to overcome was that the properties were designed and positioned in the market exclusively for buy-to-let usage rather than owner occupation. This specialised property use restricted the potential exit strategies available, causing concern for prospective lenders about the client’s ability to refinance or sell the properties within the loan term.

A down valuation further complicated matters, as it reduced the apparent discount being achieved on the purchase. This not only affected the financial dynamics of the deal for the purchaser but also raised questions with potential lenders about the true market value of the properties and the viability of the investment.

What was the process?

To tackle these issues, we worked closely with potential lenders and provided detailed comparable sales data to support the valuation expectations and demonstrate the genuine value proposition in the transaction.

Leveraging our expertise and lender relationships, we initiated discussions with the receiver about previous sales and completions within the development to gather additional comparable evidence, further supporting our valuation position.

Going above and beyond standard brokerage services, we actively assisted the client in their negotiations with the receiver. This intervention proved successful, resulting in a reduction of the acquisition price that restored a healthy below-market-value discount, making the deal more attractive to both the client and potential lenders.

What was the solution?

Despite the initial complications, the client remained committed to completing the purchase, recognising the strength of the local rental market and the long-term investment potential of adding these properties to their portfolio.

We successfully secured bridging finance at 90% of the purchase price, representing 75% of the property value, with interest retained for a 12-month term. This favourable leverage structure minimised the client’s immediate capital requirements while providing sufficient time to stabilize the investment.

Crucially, we also arranged term finance options, establishing relationships with buy-to-let mortgage lenders with the intention of refinancing the bridging loan within just 3 months of completion, significantly reducing the overall financing costs.

This comprehensive solution enabled the client to focus immediately on letting the units and generating rental income. The positive experience has already encouraged them to seek similar distressed multi-unit opportunities to further expand their portfolio.

While the client acknowledged that the acquisition process wasn’t entirely smooth, they appreciated our persistent efforts and expertise in ensuring the transaction completed with the best possible terms, despite the challenges encountered along the way.

Need help securing bridging finance for multi-unit properties? Our experts are on hand to assist. Call 020 3903 9875 to speak to an adviser, or use our online contact form.