Capital Raise using aggregate value – MUBF
Would you like to increase the value of your multi Unit block of flats for borrowing purposes? This MUBF type of asset class is proving to be extremely popular for many landlords . The attraction being that, compared to owning multiple single flats and houses, there is less management time involved. It is often possible to purchase MUBFs at a block discount and they will also often provide a higher yield.
The approach lenders take when it comes to valuing a MUBF
For the large majority of lenders, when instructing a valuation on a MUBF they will request commentary on the block value to be provided. This being the figure that they will lend off. This is effectively the market value of each unit but with a 10%-15% discount applied to the total because the investor is buying the whole block of flats, and as such is expected to command a block discount.
This ‘block value’ is obviously a good thing if you are looking to purchase a MUBF as the purchase price will be lower than would it would be that if you had bought the individual flats (the block discount) but this is not ideal if you already own a MUBF and you are wanting to refinance the property!
Using the aggregate value to Capital raise
After purchasing a MUBF at a discount some clients then want to release the discount by splitting the units into separate leasehold titles. However, this can be difficult to refinance due to lenders exposure rules. We have access to a lender that will lend off the aggregate value.The ‘aggregate value’ is the value of each individual unit as if it was its own leasehold title, but without the need to legally split the title.
We have placed multiple deals with our lender and have found that the ‘aggregate value’ is often at least 10% higher than the ‘block value’, meaning the loan size that they can provide will also be higher. This in turn enables you to capital raise more money, which is always a big win for our clients! This can apply to semi commercial units as well.
Refinance of a MUBF consisting of 5 flats and a commercial unit on the ground floor
The block value that the valuation firm provided was £950,000 but the lender also requested commentary on the aggregate value for lending purposes. The figure provided by the valuer was £1,265,000. This is an increase of £315,000 which was a great outcome for the client who was looking to capital raise as money as possible to go towards further property investment.
How we can help you
It is more important than ever to seek the advice of an adviser who specialises in this market.
If you would like to increase the likelihood of receiving a higher valuation on your MUBF then we are ready to help you with your enquiry. The advisers at Advocate Finance are experts in this area of Buy to Let lending, including dealing with broken up blocks of flats and unusual circumstances. Please get in touch if you think we can help your project using the aggregate value to increase the value of your Multi Unit block of Flats and capital raise.
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Henry Barley – Property Finance Adviser
Email : Henry@advocatefinance.co.uk