66. The Unbiased side of Title Splitting

The Property Finance Podcast

In this episode, Michael discusses the unbiased side of Title Splitting, and weighs up the pros and cons of the biggest strategy out there at the moment!

The calculation mentioned during the episode is the following: -

For example, if I have a block of flats that when split are worth £1m, then they are likely going to be purchasable for approximately £850,000 based on the average block discount that we see at the moment.

So if you were to go for a commercial mortgage over the block of flats, then it would look something like this: -

I HAVE LEFT FEES OUT TO KEEP IT SIMPLE

Purchase Price - £850,000

Market Value when split - £1,000,000

Mortgage at 75% LTV - £637,500

Deposit - £212,500

So in the scenario of taking a standard mortgage, you need a deposit of £212,500. You also have to wait until the title is split and your fixed term is over before you can refinance to 75% of the £1m and access the further £112,500 tied into the deal.

If you take the same deal, and use a Bridging Loan, then you would potentially be looking at figures like this: -

Purchase Price - £850,000

Market Value when split - £1,000,000

Bridging Loan at 75% LTV - £750,000

Deposit - £100,000

As you can see, using a Bridging loan significantly reduces the deposit that you need to put into the deal. The plan would be to hold on a bridge until the titles have been registered as split, which could be 6-9 months, and then drawdown on the commercial mortgage, which should replace the bridge like for like.

Obviously I have left out fees in order to keep this simple, but you would need to take into the account the fees for the bridge and the cost of the interest for the bridge (however, the property should be cash flowing, so this should ease the burden of the bridging loan interest), and assess the deal based on what suits you best at the time.

Helpful Links: -

www.thepropertyfinancecollective.co.uk

www.thepropertyfinanceacademy.circle.so

The Host: -

With a passion for creative finance and the ability to structure deals for Finance, I love helping first time Developers and Investors to get deals packaged for the finance needed to push Property Careers forward, and to date I have raised over £100 million for Developers and Investors

I first got into property at the age of 18 when I got into Conveyancing straight out of school. I then went into Estate Agency, back into Conveyancing and I then got into brokering at the age of 22. I decided a year and a half later that I wanted to work for myself and try and shake up the market place! At the age of 24 I set up The Property Finance Guy and became the youngest owner of a Commercial Finance Brokerage in the Country, and alongside this I now also have a successful Training Company, educating Investor and Developers on how to raise finance, and a successful Podcast.
I am a keen public speaker and have delivered training and speeches to over 1000 investors and developers in the last 2 years.

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Disclaimer: -

With the market changing so quickly, the content could be out of date at the time of listening.

This Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.