How a First-Time Commercial Landlord Secured a £1.5M Commercial Mortgage After the High Street Said No

We provided an efficient service from the very start, helping the client make his offer, guiding him through to a mortgage offer, and supporting him through to completion.

Key takeaways

• Most commercial lenders prefer experienced landlords, long leases and full occupancy, but specialist lenders will consider first-time landlords on the strength of the deal.
• Commercial mortgages usually need a larger deposit than residential; this deal completed at 56% loan-to-value with a £1.2m deposit on a £2.7m purchase.
• Retained company profits can be invested in commercial property through a holding company to build a retirement income, often on an interest-only basis.

The challenge: a first-time landlord buying a multi-let estate

This client had built something good. A successful environmental and waste management company, run through a holding company structure, based in Derbyshire. He’s a sole director in his early forties, and he had a problem a lot of successful owners share: significant profits sitting in the business, no pension, and a real wish to put that money to work for his later life.

He’d found what he wanted. A 14-unit, multi-let industrial estate in Nottingham, let to 14 tenants, on the market at £2.7m. He planned to buy it as an investment through his holding company, putting in a £1.2m deposit and borrowing £1.5m over 10 years, a sensible 56% loan-to-value. The estate was producing around £280k a year in rent. His accountant, a professional connection of mine, introduced us in December, and we held the first meeting at the accountant’s office, which always helps.

Why the high street declined the mortgage

On paper, the numbers were strong. So what was the problem? The client was a first-time commercial landlord, the tenancies were short-term, and not every unit was occupied.

Let me be straight about how lenders think here. Most commercial property lenders want a seasoned landlord, long quality leases, and a fully let building on completion. A first-time investor buying a multi-let estate with short tenancies and a couple of empty units ticks nearly every box that makes a lender nervous. The high street looked at it and declined to offer terms.

How Howe Commercial Finance secured a £1.5m commercial mortgage

The deal itself was sound. A strong deposit, a sensible loan-to-value, and good rental income. It just needed a lender who could see past the first-time landlord label, and I knew which ones would.

At Howe Commercial Finance, we arranged a commercial mortgage to the holding company for investment purposes: £1.5m at 56% loan-to-value, interest only, over a 10-year term. The rate was fixed for five years at 7.5%, with a 1% lender fee and the ability to repay up to 10% of the capital each year without penalty. For a first-time investor, that’s virtually a high street prime deal, and that doesn’t happen by accident.

From there it was about keeping the wheels turning. We had an Agreement in Principle ready at the start of January, the offer went to the vendor, and once accepted we completed the application. The valuation was instructed, both the lender’s and the borrower’s solicitors were appointed, and local environmental searches were carried out. The mortgage offer was issued on 4 March, around six weeks after submission. The lender, quite rightly, wouldn’t release funds until every query was answered, so I stepped in with the solicitors where needed to keep things moving. We completed and drew down on 19 May.

The outcome: a £2.7m estate bought as a retirement investment

• With rent of around £280k a year and borrowing costs of around £116k, the investment produces in the region of £164k a year before expenses.
• 14 local businesses keep the premises they trade from.
• Over £120k in stamp duty was paid as part of the purchase.
• He’s now built the experience and confidence to look at buying another.

As the client said himself, he didn’t realise there was so much to it. He was genuinely appreciative of the support along the way.

What other business owners can learn from this deal

If you take one thing from this deal, make it this: surround yourself with good professionals.

• We introduced the borrower to a responsive, proactive solicitor in the Derby area. The best are worth paying for, and they make all the difference.
• The client’s accountant was integral, providing financial information quickly and backing his client throughout.
• Always use a broker. A good one will research the whole market and bring you the best deal, not just the first one.
• Be responsive and proactive when challenges come up. There’s always something, and you just crack on and deal with it.

This was a traditional deal, built on trusted introductions and relationships, with the client, the lender, the accountant and the solicitor all wanting to get it done well. A proper circular economy, with a good dose of goodwill. I expect to see this client again.