What type of property best suit this strategy?
As already discussed, in the previous article (May 2022), with a Title Splitting strategy, the key is to find and buy unbroken, freehold multi-unit block of flats.
This means they could be a block of residential flats as well as a mixed-use block with both commercial below and residential above.
The aim is to ‘create value’ by refurbishing all the units and then disaggregating – creating separate leases for each of them.
There is a lot of these block all across the UK and are ripe for you to exploit their untapped value!
Where to source them from?
As always the easiest ways to find them are online via the usual portals as well as some more nuanced techniques, which I list below:
- Tip: Search for 6 beds or more properties, as Rightmove does not really have a feature for these blocks of apartments.
- You can use the ‘Keyword’ function to search for ‘block of flats’ for example.
- Search for 6 beds or more properties find them.
- Here there is even a dedicated search filter for ‘Block of Apartments’.
- Property Auctions:
- We buy a large proportion of our Multi Unit Blocks for Title Splitting at the property auctions.
- You should be able to quickly locate your local property auctions, as well as some of the national ones, such as Savills and Allsopp.
- Get comfortable with Legal Packs and start to download and read at least 10 of them to build your learning. These pack are great as they contain a lot of information about the block that you will need to know.
Remember to look out for things that may be missing (such as planning permission for the flat conversions) or problems with block itself (small studio flats, which will be hard to refinance) or low grade EPC ratings, which will need to be fixed before you can get a mortgage.
- Commercial Agents:
Commercial agents are also a great source for these types of deals, as they help landlords sell their property portfolio.
You can once again locate these commercial agents online.
e.g Allsopp ‘data rooms’ is a good source to find some of the MUFB.
- Direct to Vendor:
During our 6 weeks Title Splitting coaching program, we also teach trainees how to source by going direct to vendor. This means having a value proposition that will help vendors/ landlords as well as being beneficial for yourself.
Value Proposition to Sellers:
We typically offer to buy their property very fast (with cash) and can complete within 28 days and allow their tenants to stay on (if they have valid assured shorthold tenancies (ASTs) in place) as Landlords don’t want to empty these big blocks to sell as vacant possession and then find it takes months to sell.
How can you fund these purchases?
Just like when you are buying a Buy to Let property, you can use the following types of funding mechanisms. I have listed them in the order that I prefer to buy these MUFB given the complexity that are attached to them and the potential for delays before you can refinance all of your capital out.
This funding method is great as you can move on these type of purchases quickly and without much hassle that comes with bank financing.
However, these blocks tend to cost more than the average terraced house so may not be a viable option for a lot of readers.
I prefer cash rather than bridging as its cheaper and also if there is a delay in the paperwork, it doesn’t end up costing you the deal or a large chunk of your profit.
- Investor Finance or Joint Ventures:
You can seek investor finance and reward them with either a fixed return or a proportion of the profit and/or the overall deal.
This funding method also provides some safety against any delays in the title splitting exit.
- Traditional Mortgages:
When building MUFB you can buy them using a traditional mortgage (or a commercial loan) if they are viable collateral in their present condition and the surveyor agrees.
Mortgages with no Early Repayment Charges (ERC) is ideal, as when we come to refinance, after title splitting in 6 months on average, we will need to get out of this initial mortgage without paying high fees.
- Commercial Mortgages:
You can buy using commercial mortgages (from Lloyds bank etc) but these can be higher in interest rate, take longer to secure and will offer you less Loan to Value ratios than traditional residential mortgages. This means you will need higher deposit amount.
This is certainly not an option I consider to be worth it but for completeness sake I have added here.
- Bridging Finance:
Bridging Finance can work really well with the strategy of Title Splitting.
Bridging companies will allow you to buy some of these MUFB with some ‘issues’ with them, be that to do with their general condition or even issue with a lack of planning.
So long as you know what the issues are and how to solve them you can make buy MUFB using bridging finance. Generally speaking they will lend up to 70% of the purchase price.
However the challenge with bridging finance is that they can be expensive, especially if you get stuck on them for longer than anticipated.
Group company structure you will need
As part of this strategy, you must ensure that you have the correct group company structure to hold (1) the Freehold as well as (2) the Leaseholds.
Lenders don’t want the same entity to hold both interests (the Freehold and the Leaseholds), in fear that you may, in future, be able to alter the terms of the lease jeopardising their interest over the assets!
Therefore, you should have a group company structure in place, which also ensure you don’t have to pay Stamp Duty Land Tax (SDLT) twice -once on purchase and another after the Title Splitting phase. With the correct group company structure in place, you will be able to move properties in between the companies (known as intra-group company transfer).
Want to get involved in Title Splitting as a strategy and buy Multi Unit Block of Flats?
We run a 6 week (one to one) coaching program, where we handhold you through this myriad of information to help you:
(3) Refurbish and add the ‘right; value to these multi-unit freehold block &
(4) Title Split them into singular units on their own leases that can be either refinanced or
sold. This means you can, like me, recycle most (if not all) of your capital out of these next
blocks to use for the next purchase and thereby quickly scale your property portfolios.