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The Client’s Situation
An experienced property investor approached us looking for a funding solution to acquire four buy-to-let properties from a retiring landlord who was selling part of their investment portfolio.
The price for the portfolio had been agreed at £323,871, representing approximately 35% below the estimated open market value of £500,000—an excellent investment opportunity, but one that presented challenges when sourcing finance.
The client’s priorities were clear:
- Minimise their deposit contribution.
- Secure competitive funding for the purchase.
- Ensure there was a straightforward route onto long-term buy-to-let mortgages as quickly as possible.
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The Challenge
Purchasing property significantly below market value is attractive for investors, but many mainstream buy-to-let lenders are unable to support these transactions.
Most lenders will only lend against the purchase price, rather than the higher market value, meaning investors often need to contribute substantially more cash than desired.
In this case, we also needed to overcome several additional challenges:
- Coordinating valuations across four separate properties.
- Finding a lender comfortable recognising the genuine market value rather than simply the discounted purchase price.
- Structuring the borrowing efficiently under a single facility to reduce complexity and costs.
- Ensuring there was a viable exit strategy onto individual buy-to-let mortgages.
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Our Solution
Given the significant discount being achieved, a specialist bridging finance solution was the most appropriate option.
We introduced the client to a specialist bridging lender with experience in below-market-value acquisitions. The lender was prepared to advance up to 90% of the purchase price, provided the loan did not exceed 75% of the independently assessed market value.
This structure enabled the client to maximise leverage while maintaining a sensible loan-to-value ratio based on the properties’ true worth.
To further improve efficiency, all four properties were funded under one loan facility, reducing legal costs, simplifying administration and speeding up completion.
As all four properties were immediately lettable, the lender also allowed the interest to be serviced monthly using the rental income, helping maximise the client’s net funds available on completion.
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The Result
The independent valuation confirmed the expected market value of approximately £500,000, allowing the lender to provide:
- Purchase Price: £323,871
- Gross Loan: £291,483.90 (90% of the purchase price)
- Term: 12 months
- Interest Rate: 0.89% per month (10.68% per annum)
- Arrangement Fee: 2% (deducted from the gross loan)
After six months of ownership, the client will be able to refinance onto competitive buy-to-let mortgages based on the market value of each property at up to 75% loan-to-value.
The bridging lender also offers its own buy-to-let refinance products, creating a smooth transition from short-term funding to long-term finance.
In addition, Advocate Finance has access to alternative lenders capable of offering day-one refinancing based on market value, removing the need to wait six months. While these products typically carry higher rates, they can significantly reduce overall funding costs by avoiding six months of bridging interest, making them an attractive option in the right circumstances.
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Client Benefits
By working with Advocate Finance, the client was able to:
- Secure specialist funding for a complex below-market-value portfolio purchase.
- Complete with approximately a 10% deposit, preserving valuable capital for future investments.
- Benefit from a lender that understood the true value of the assets rather than relying solely on the discounted purchase price.
- Reduce legal and application costs by funding all four properties under a single facility.
- Put in place a clear refinance strategy onto long-term buy-to-let mortgages.
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How can Advocate Finance help?
Purchasing property below market value? Our commercial mortgage brokers can structure specialist bridging finance with a clear exit onto competitive buy-to-let mortgages.
We provide a FREE assessment of all our services. Please contact me directly for more information, or use the Get in Touch With Us Today feature at the bottom of this page.
