Financing pre-63 properties

We have covered pre-63 properties in the past and talked about how many of them have very strong cash-flows.

The recent downside we’ve seen is that lenders shy away from financing them for several reasons, the first and foremost is down to them being a multi-unit that requires a professional landlord to manage and banks tend to be of the view that if you don’t have lots of property already that you won’t be up to the task (which spells future losses in their books).

The next thing is SI534 which is changing the building standards for rented accommodation, this legislative change means that many pre63’s are not up to scratch, which also means most of these properties require substantial retro-fitting.

This second hurdle means that even when financing the property that you have to prove the borrower can make payments while investing in the work that needs to be carried out, because roll-up accounts are a thing of the past (something developers used), it means financing a pre-63 is exceptionally difficult.

Some banks have said that the reason they won’t do them is because it represents commercial lending, but even commercial departments are also giving negative responses, so until further notice we don’t really know what to tell you if you are looking to get a mortgage to purchase one of these buildings despite the attractive opportunity many of them represent.

Once we know more you will too!

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