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Ross Golightly

How Does a Lender Value an SA Unit?

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Hi Everyone, 

Could anyone help with an SA re-mortgage question I have?

We are planning on buying a unit for SA. We’re going to buy initially on a BTL mortgage (through a LTD company) and then flip into an SA mortgage after a period of time.

I’ve been advised that commercial SA lenders value an SA unit differently to a straightforward BTL unit and that the valuation moves beyond the bricks and mortar value to the income/profit the unit is generating based on submission of a forward 12-18 month P&L forecast. (I’ve heard of something similar with HMO’s where a commercial lender will value a unit based on a multiple of its earnings).

Does anyone have any experience of this? I’m trying to understand how an income-generating SA property would be valued by a lender, what earnings multiples would be applied and, therefore, what LTV would be possible? Thanks in advance!

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It's the same answer that I would give for somebody asking how to value HMO, it will be based on the bricks and mortar valuation. The vast majority of lenders ignore any income attached to the property as when it's empty this income does not exist. With an HMO providing certain criteria is met approximately 25% of the lenders may consider a valuation based on rent, but there can be many restrictions.

A serviced accommodation mortgage is calculated on what the equivalent AST rent would be. If you have purpose-built serviced accommodation which has been operating 2- 3 years than they may be different values, but the lenders will be very different. This does not cover a one unit property and is more likely to be a block of six flats that are all serviced accommodation.

Also please bear in mind that the mortgage that you apply for has to be suitable on day one the purpose you intend.


Regards Simon

Searchlight Finance Ltd

T:01565 654005

Based in Cheshire and clients throughout the UK. Landlord and specialist property finance advisor only dealing with investors, landlords and developers.

Buy to Let - Commercial Finance - Bridging Loans - Development Finance - HMO Finance - Refurbishment Loans - Multi Let - Limited Company - Student Lets - Portfolio Finance

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17 hours ago, Ross Golightly said:

I’ve been advised that commercial SA lenders value an SA unit differently to a straightforward BTL unit and that the valuation moves beyond the bricks and mortar value

You should talk to the mortgage adviser who advised that this is possible for SA. I've never heard of this.

If we're talking a hotel then sure! A flat, no.


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