Multi-Unit Freehold Blocks (MUFB)
Yields remain consistently high for multi-unit freehold blocks (MUFBs), these are often referred to as a complex buy to let and are popular with experienced property investors.
But what are they and how do you finance them? Read on to learn more and to see the MUFB mortgage options.
The concept of a buy to let property is understood by most people.
You buy a house, a flat or a maisonette and rent it out to tenants for six months at a time. You can easily mortgage it and remortgage it and everybody gets it.
There are, of course, alternatives to the ‘vanilla’ buy to let which can offer investors much higher returns.
Some of these are:
- holiday lets
- HMO’s
- semi-commercial
- multi-unit blocks
In this guide we are going to look at Multi-Unit Freehold Blocks (MUFB) or Multi-Unit Blocks (MUB) and the available mortgage options.
What is an MUFB?
A Multi-Unit Freehold Block, or MUFB, is one freehold property that contains separate residential dwellings. These dwellings can be houses or flats but none of them will have their own formal lease.
There are many different property types and styles, but the physical structure of an MUB will most commonly be a block of self-contained flats. This could be purpose built or a conversion from a larger property.
But sometimes it can also be a row of terraced houses which are all registered under the one title.
The rental units will all:
- be completely self-contained
- have no shared amenities (bathroom, kitchen etc)
- be independently let to tenants using a standard Assured Shorthold Tenancy (AST)
- have their own separate and private entrance
- be private and for the sole use of the tenant/s
- have separate utilities
As with a block of flats, the MUFB can have common areas external to the individual dwelling.
These could be:
- hallway
- corridor
- stairs
- garden
You will find more useful information in our article: What does MUFB mean?
Higher yields
Multi unit blocks can represent an excellent investment opportunity, with yields far in excess of standard single unit properties.
They are lucrative for investors due to the economies of scale, help to diversify a portfolio and reduce exposure to voids.
They are by their nature larger deals and so experience is needed when arranging the finance.
Investors can improve the capital return by separating the title and selling the units off individually at any point in the future.
Sounds like an HMO to me?
It’s true that at first glance an MUFB can feel like a House of Multiple Occupation (HMO) but the two are quite different.
With an HMO property you would have shared facilities such as the kitchen and possibly bathroom. Tenants will have their own private bedroom only, possibly an en-suite as well. There will be just one main entrance to the property.
An HMO will typically have one supply of gas and electricity that services the whole building.
Multi-Unit Freehold Blocks are comprised of several individual properties that are self-contained (like a small block of flats). Because of this no HMO licence is required.
Not on the High Street!
The high street lenders can’t help every mortgage customer and they prefer the simple, low-risk ones.
If your situation is a bit different or needs a more personalised solution then our brokers can help.
Expert advice, for all situations.
Bridging Loans
The most flexible of secured loans and often misunderstood. Bridge loans can be used in so many different ways and can be arranged super fast.
Large Loans
High net worth mortgage brokers understand complex large loans and unique situations and can source bespoke deals from the right lenders.
Let to Buy
Let to buy combines a buy to let remortgage with a residential mortgage. Allowing you to move house while keeping your current home.
MUFB Mortgages
Freehold blocks are not quite as straightforward as a single unit BTL when looking at the finance options, they sit between a buy to let mortgage and commercial finance.
Consequently there are fewer active lenders offering multi-unit freehold block mortgages but the concept of a freehold block is favoured by most.
As there is just one title registered for the property at Land Registry, only one mortgage is needed, even though there may be 4-10 or more individual dwellings.
Key features:
- Upto 85% loan to value
- Interest only or repayment
- Fixed rates available
- Terms from 5 to 40 years
- Portfolio landlords accepted
- Ltd Co and SPV accepted
- First Time Landlords accepted
- Loans £150K to £10m
- Element of HMO acceptable
- No minimum income
- No upper age limit
Most of the smaller MUB’s will be acceptable for a standard buy to let mortgage.
Some multi-units are deemed too complex to be financed with a MUFB mortgage. This could be because of the number of units, or perhaps some units have already been sold off or are used as an HMO.
For these cases your broker will suggest that a commercial mortgage is more suitable.
There’s no real limit to the number of units or dwellings. As long as they are all held under one freehold title you will be able to obtain finance.
Semi-Commercial
This is not strictly MUFB territory but it might be helpful to be aware of what a semi-commercial, or mixed-use, property is. You may come across some of these properties for sale.
The clue is in the term ‘mixed-use’.
It is a property that includes both residential living accommodation along with commercial/business space. Some simple examples would be:
- A newsagent shop with owner flat upstairs
- A pub with separate owners accommodation
- A retail shop with several self-contained flats above.
Finance for these is generally through a semi-commercial loan, mixed use mortgage or commercial mortgage. These are available from commercial lenders and brokers.
MUFB Benefits
Multi-Unit Blocks are sometimes referred to as a complex buy to let and are most popular with experienced property investors
CASHFLOW
Having multiple letting units means your exposure to voids is shared. If one tenant leaves you will still receive rent from the remaining units.
YIELDS
Rental yields are generally higher than the standard single let buy to let.
DEMAND
Multi units are popular with tenants and can be more appealing to some than an HMO.
LICENSING
An MUFB does not require any licences as all dwellings are separate and self-contained.
OPPORTUNITY
At some point in the future you would have the opportunity to create individual leases for all of the units. This would give you the opportunity to sell all of them, or perhaps sell just a couple and keep some for the rental income.
Why use a broker?
For most standard residential mortgages or buy to let mortgages there is an opportunity for the borrower to go direct to a lender. There’s lots of mortgage comparison websites and as long as your personal situation is very straightforward you should be able to pick up a direct deal.
While this could be quite satisfying, you won’t actually know if your deal is one of the better ones or just, OK.
Once you, or your property, stray from the ‘standard’ definitions, it becomes more important to seek professional advice.
A buy to let broker’s job is to know where the right deals are for their clients. And their knowledge and experience can be invaluable to grabbing a mortgage deal in the shortest amount of time or setting you up for a transition over to limited company/SPV.
Imagine this simple scenario:
- Self-employed borrower
- Shareholding director
- Who owns multiple companies
- With multiple income streams
- A highly geared portfolio landlord
- Wants to buy a MUFB for £1m, using an SPV
This situation is more common than you might think. Many experienced investors have multiple sources of income, are self-employed and will probably hold more than 5 investment properties, with the likelihood that some of those could be JV’s.
If they tried to arrange their own finance it would not be very cost effective, as it would take hours and hours of hunting around in the dark.
A specialist broker on the other hand would already have 2 or 3 lenders in mind.
Respect Mortgages can introduce you to a Multi-Unit Freehold mortgage specialist in one of the largest and best known mortgage brokers in the UK.
With coverage all over the UK, there’s no restrictions on where you live. They are an award winning independent broker who have been in business for more than 45 years.
