Restructuring of Buy-to-let Portfolio

An existing client of Cox & Co approached us for advice when their tired and ageing portfolio of rental properties stopped making money.

Our client owns a modest portfolio of 12 flats in Scotland which they received over a decade ago under a divorce settlement. Aside from putting management in our hands a couple of years ago, our client never paid much attention, instead choosing to let the portfolio tick over while they focused on their health and enjoyed their retirement.

Prime Locations , Spiralling Costs

Cox & Co has never had any problem letting the flats out because of their prime city centre locations, but having no significant upgrades since our client took them over resulted in spiralling maintenance and repair bills. The generally poor condition also put rentals below market value which, when added to expensive mortgage lending, meant that profits gradually disappeared over the last two years.

Our client thought they would have to cut their losses and sell the portfolio because anything else would be too expensive, too time consuming and too stressful. Fortunately they came to the right place for help because this is precisely our area of expertise and we don’t call ourselves property investment specialists for no reason. Cox & Co is uniquely set up to deal with all aspects of buying, owning and selling property and this is a good example of how we help our clients.

Reviewing the Property Portfolio

As one of the best buy to let mortgage advisors Edinburgh has to offer; Cox & Co had investors willing to buy the portfolio off-market, but the condition meant that prices would not be as good as could reasonably be expected even for Edinburgh, and the properties were not ready for selling on-market either due to having tenants in situ. Additionally, selling up wouldn’t meet our client’s investment goal of achieving capital growth and another income stream alongside their pension, so we looked at other options.

Our Portfolio Manager undertook a comprehensive review of each property to assess which upgrades would have the biggest impact for our client with regards to improving yields vs upfront cost. A carefully budgeted plan was pulled together to implement the upgrades on a staged basis with minimal disruption to tenants, but our client did not have the capital needed to put the plan in motion, so we asked our Mortgage Advisor to look into the matter.

Reducing Monthly Payments

Following a complex lending review, we identified that four properties were unencumbered, three in Aberdeen were above 90% LTV trapped on lender’s SVR due to issues with the local housing market, and five in Edinburgh were tied into a long term fixed rate of 5.44% despite an average LTV of 54%. These last five flats contained enough equity to completely fund the necessary upgrades, so we refinanced them, providing a net lump sum of £143k and saving our client £616 per month at the same time.

We have now started the process of bringing the flats up to scratch using our own panel of quality tradesmen, overseeing the project in-house. As a result, we confidently expect significant rent increases across our client’s entire portfolio within the next 12 months. The three Aberdeen mortgages have also been paid down to 75%, allowing us to switch them to a much better deal with an extra monthly saving of £350

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