There are a number of different ways that Buy to Lets can be purchased, these include the following: 

• Layered Buy-To-Lets - Group structures with holding companies  
• Limited Companies (SPV’s - Special Purpose Vehicles)
• Limited Liability Partnerships 
• Personal Name
• Trading Companies
• Trusts
• Other

Holiday lets represent a unique segment of properties that are rented out on a short-term basis to vacationers or tourists. Let's delve into the specifics within the context of the UK mortgage market and lending:

Mortgage Rates - There are specific rates for holiday lets which often are slightly higher than those of standard buy-to-let rates. 

Lending Criteria - Lenders assess holiday let mortgage applications based on specific criteria that differ from traditional residential mortgages. Key factors considered include the property's location, potential rental income, occupancy rates, and its suitability for holiday accommodation.

Rental Income Assessment - There are typically two ways in which rental income can be assessed, these are as follows:

• The lender will ask the valuer to provide a rental valuation as if the property were to be let on a standard AST basis 

OR

• A thorough assessment will be done which involves evaluating historical rental income data, occupancy rates, and rental projections based on market demand and seasonal fluctuations.

Location and Market Demand - The location of the holiday let property plays a crucial role in its attractiveness to lenders. Properties situated in desirable holiday destinations with strong rental demand are viewed more favourably by lenders, as they are likely to generate higher rental income and maintain property value over time.

Regulatory Compliance - Lenders ensure that holiday let properties comply with relevant regulations and licensing requirements. This may include adherence to planning regulations, building standards, health and safety regulations, and any local authority licensing requirements for holiday accommodation.

HMOs often entail additional criteria when dealing with lenders. Below are key points to consider:

Article 4 - This pertains to areas where planning permission is necessary to designate a property as an HMO. Refer to the Article 4 dropdown for a comprehensive definition.

Licensing - Certain boroughs mandate a licence for renting out your property. Refer to the Licensing dropdown for more details.

Number of bedrooms - Properties with four or fewer bedrooms may fall under standard tenancy assessment criteria, potentially affecting borrowing limits. Conversely, properties with higher bedroom counts may encounter fewer available lenders due to reduced demand for future resale potential in case of repossession.

Valuations - Further information on valuations can be found in the HMO’s - Houses of Multiple Occupation - Valuations dropdown.

Standard mortgage valuations and investment valuations play distinct roles in the evaluation of properties, particularly in the context of Houses in Multiple Occupation (HMOs).

Standard Mortgage Valuations

Here are some key aspects:

• Market Value: The valuation aims to determine the property's current market value based on factors such as location, size, condition, and comparable sales in the area.
• Physical Condition: The valuer assesses the property's physical condition to ensure it meets the lender's standards for habitability and structural integrity.
• Comparable Sales: The valuer considers recent sales of similar properties in the vicinity to establish a benchmark for the property's value.

Investment Valuations

Investment valuations for HMOs focus on assessing the property's potential income-generating capacity and overall investment viability. Unlike mortgage valuations, which primarily consider market value, investment valuations take into account the property's income and expenses to determine its value to an investor. 

Here are some key aspects:

• Rental Income: The valuation considers the property's potential rental income based on factors such as location, property size, number of rooms, and local rental market conditions.
• Operating Expenses: Expenses such as maintenance, management fees, utilities, and insurance are factored into the valuation to determine the property's net operating income (NOI).
• Yield: The valuation calculates the property's yield, which is the ratio of annual rental income to the property's value. Yield is a key metric used by investors to assess the property's return on investment.
• Market Trends: Investment valuations also consider market trends, demand for rental properties, and future growth potential in the area.

As investment valuations consider the HMO as more of a running business they can often produce higher market values than standard valuations.

Property licensing for houses rented out to tenants is an important legal requirement aimed at ensuring the safety, welfare, and proper management of rental properties.

Licences in boroughs that require them will usually mean that lenders will require sight of the licence too, however, there are some lenders who can allow for a buy-to-mortgage to be completed where an application has been submitted but the licence is yet to be granted.

There are several types of property licensing schemes in place, including:

Mandatory HMO Licensing - Houses in Multiple Occupation (HMOs) meeting certain criteria must be licensed by the local authority. This typically applies to properties with three or more tenants forming two or more households sharing facilities like kitchens or bathrooms.

Additional Licensing - Some local authorities may implement additional licensing schemes, which require certain types of HMOs not covered by mandatory licensing to obtain a licence. This extends licensing requirements to smaller HMOs or those in specific areas designated by the local authority.

Selective Licensing - Selective licensing schemes apply to all privately rented properties within a specific area designated by the local authority. Landlords must obtain a licence to rent out properties within these designated areas, regardless of property type.

Property licensing aims to ensure that landlords meet certain standards regarding the safety, management, and condition of rental properties. Landlords typically need to demonstrate compliance with regulations related to fire safety, electrical safety, gas safety, and general property standards. Failure to obtain the necessary licences or comply with licensing conditions can result in fines, prosecution, or difficulties in managing the property.

It's essential for landlords and property owners in the UK to understand the specific licensing requirements in their area and ensure compliance to operate legally and responsibly within the rental market. Local authorities are responsible for administering and enforcing property licensing schemes, so landlords should engage with their local authority for guidance and assistance regarding licensing obligations.

What is an SPV?

A Special Purpose Vehicle (SPV) is a legal entity set up for a specific, often limited, purpose. In the context of property investment, an SPV is typically a limited company formed solely for the purpose of holding and managing property assets.

Advantages

Tax Efficiency: One of the primary motivations for using an SPV is tax efficiency. Limited companies pay corporation tax on their profits, which is typically lower than personal income tax rates depending on your tax banding. Additionally, mortgage interest relief changes have made SPVs more attractive for landlords as mortgage interest is fully tax-deductible for limited companies whereas it is not in your personal name. 

Disclosure: We are not tax consultants therefore please do not consider this advice, each individuals circumstances are different therefore we recommend you speak with a tax consultant. 

Limited Liability: SPVs offer limited liability protection to their owners (shareholders). This means that in the event of financial difficulties or legal issues, the liability of shareholders is limited to the amount of capital they have invested in the company.

Disclosure: We are not able to offer legal advice therefore please do not consider this advice, each individuals circumstances are different therefore we recommend you speak with a legal advisor. 

Shareholders: An increasingly prevalent practice involves parents including their children as shareholders in limited companies. This strategy is typically recommended by tax professionals and is often employed to mitigate future tax liabilities, such as inheritance tax (IHT). Parents are able to gift the shares to their children overtime eventually transferring ownership. 

Mortgages for SPV Buy-to-Lets

Mortgage products are available specifically for SPV Buy-to-Let properties. These mortgages may have slightly different criteria and interest rates compared to mortgages for individual landlords.

Lenders will typically apply a less stringent stress test which allows you to borrow more especially in the instance where you are a higher or additional rate tax payer. 

Deposits and loan to values typically remain the same. 

Legal and Regulatory Considerations

Setting up an SPV involves legal and administrative steps, including registering the company with Companies House and appointing directors and shareholders.

Lenders ask that the following SIC codes are applied to the limited company:

68100 - Buying and sellng or own real estate
68209 - Other letting and operating of own or leased real estate
68320 - Management of real estate on a fee or contract basis.

SPVs must comply with all relevant laws and regulations governing property investment, landlord responsibilities, and company administration.It's essential to seek professional advice from accountants, solicitors, and tax advisors to ensure compliance with all legal and regulatory requirements.

What is a Multi-unit block (MUB)

A Multi-Unit Block (MUB) refers to a property comprising multiple individual dwellings within the same building, all owned under a single title. Examples include a Victorian house divided into two flats sharing one title deed, or an apartment complex with numerous units under one title.

Mortgages for a Multi-unit block (MUB)

Mortgages for MUBs are typically offered by specialist Buy-to-Let (BTL) lenders who specialise in handling the complexities associated with such properties. These lenders tailor their rates to account for the unique nature of MUBs. While the mortgage application process for MUBs parallels that of standard Buy-to-Let mortgages, there are differences in stress testing and valuation procedures.

Stress tests for MUB mortgages are often more rigorous compared to conventional Buy-to-Let mortgages, reflecting the increased risk to the lender due to the property's multifaceted nature. 

In terms of valuation, there's a common misconception that the value of each individual unit within a MUB is simply summed up to determine the overall property value. However, valuers assess the entire building as a cohesive entity. Consequently, individual units may be valued lower than their potential market value, primarily because they lack independent leases.

To avoid surprises that could affect lending requirements, it's advisable to conduct a valuation before the lender sends out their own valuer. This proactive approach ensures that any concerns about property valuation are addressed beforehand, potentially impacting the lending process positively.

There are a number of ways that a property can be rented; usually, the tenant chosen suits the objective set out by the landlord, i.e. a higher yield, peace of mind, and consistency of payments. Lenders can accept the following types of tenancies:

• Corporate let
• DSS tenants
• Guaranteed rent
• Holiday let   
• Let-To-Buy
• Standard AST’s
• Student Lets
• Untenanted 
• Vulnerable tenants 
• Other

A landlord transitions into a portfolio landlord status when they possess four or more Buy-To-Let properties with mortgages. Consequently, certain lenders may impose additional criteria. Here are several key considerations:

Maximum Lending - Lenders may specify an upper limit on the borrowing amount across your portfolio. While this limit often extends into the tens of millions, it's uncommon for most individuals to reach this threshold. However, if you do, it's straightforward to explore alternatives with other lenders.

Maximum Number of Properties - Some lenders impose a cap on the number of properties that can be secured against at any given time. For instance, a lender might stipulate a maximum of 10 mortgaged properties under their arrangement, regardless of their individual values or mortgage sizes. Switching to a lender with a higher limit or no maximum requirement is an uncomplicated solution.

Maximum Loan-to-Value (LTV) - Lenders evaluate the overall loan-to-value ratio of your portfolio, which can favour certain landlords. This assessment can be advantageous, particularly if some properties have incurred lender fees or experienced value depreciation, resulting in LTVs above 75%. By calculating the portfolio's average, the LTV often falls below the 75% threshold, facilitating compliance with lender criteria.

Stress Tests - This entails an income evaluation wherein lenders verify whether the income generated is sufficient to cover the total outstanding mortgage balance. In cases where it isn't, opting for a lender that doesn't stress your property portfolio is advisable.

Regardless of the specific concern, maintaining a property portfolio schedule enables us to swiftly assess available options and provide recommendations.

Mortgage valuations are conducted by lenders when a borrower applies for a mortgage. The primary purpose of these valuations is to assess the property's market value to determine whether it provides sufficient security for the loan.

A valuers perspective

Property Size and Condition - Valuers assess the size, layout, and condition of the property, including its structural integrity, age, and overall maintenance level.

Location - Location is a crucial factor affecting property value. Valuers consider factors such as proximity to amenities, transport links, schools, parks, and other local facilities.

Comparable Sales - Valuers analyse recent sales data of similar properties (comparables) in the local area to determine the property's market value. These comparables help establish a benchmark for the property's valuation.

Market Conditions - Valuers consider current market conditions, including supply and demand dynamics, trends in property prices, and economic factors influencing the property market.

Planning and Development Potential - Valuers assess the property's potential for future development, renovations, or extensions, which can impact its value.

Environmental Factors - Valuers may consider environmental factors such as flood risk, pollution, or contamination issues that could affect the property's value.

Easements and Restrictions - Valuers evaluate any easements, rights of way, or restrictions affecting the property's use or development potential.

A lenders perspective

Loan-to-Value (LTV) Ratio - Lenders assess the property's value relative to the loan amount requested by the borrower. A lower LTV ratio indicates a lower risk for the lender.

Mortgage Affordability - Lenders evaluate the borrower's ability to afford the mortgage payments based on factors such as income, expenses, and creditworthiness.

Property Suitability - Lenders consider whether the property meets their lending criteria, including factors such as property type, construction quality, and intended use.

Marketability - Lenders assess the property's marketability and resale potential in case of default, considering factors such as location, condition, and demand in the local market.

Compliance and Legal Issues - Lenders ensure that the property complies with relevant regulations and planning permissions. They also evaluate any legal issues or encumbrances affecting the property's title.

Risk Assessment - Lenders conduct risk assessments to evaluate the overall risk associated with the mortgage, considering factors such as property value, borrower credit risk, and market conditions.

Overall, both valuers and lenders aim to conduct thorough assessments to determine the property's value and suitability for lending purposes. Their evaluations help ensure that property transactions and mortgage loans are based on accurate and informed considerations.