Case Study: Successful Transformation of a Shared Residential Rental Property in Dublin 7
Onate has been providing loans where borrowers aim to purchase properties in need of refurbishment. The borrowers then typically reconfigure these properties to maximise bedroom and communal living space.
In early 2023, a property investor identified a residential property in Dublin 7 with potential for shared living accommodations. Their intention was to fully refurbish the property so it appealed to modern renters.
The project needed quick access to funds to secure the property in a competitive market and to commence work promptly.
The property investors strategy was to sell the property once the works were completed and rental income was established.
Recently, the property sold for a handsome profit, which the borrower can reinvest in their next project.
Onate provided a tailored financial package to address challenges:
Transactional Certainty: Leveraging Onate's strong capitalisation and funding from various financial institutions
70% Funding of Purchase Price: Onate funded 70% of the purchase price, significantly reducing the developer's initial capital commitment
Fast Funding Release: Onate's agile and efficient processing ensured quick access to funds, allowing the property investor to close the purchase and start refurbishment promptly.
The financial solution provided by Onate led to several positive outcomes:
Reviving a property in poor condition: The project brought a substandard property back into the market
Economic viability: Onate's funding made the project economically viable, promising a strong ROI upon completion
Community benefit: refurbished units helped alleviate local housing shortages, providing high-quality living spaces in a prime location.
Onate's bridging finance solution showcases the pivotal role of tailored financial products in unlocking the potential of real estate investments. It highlights how strategic finance can drive urban renewal and contribute positively to the housing landscape.
For those ready to explore new opportunities and in need of a financial partner, contact John Ring at john@onate.com / 087 830 5276 or Michael Gavin at michael@onate.com / 085 145 4200.
Reflecting on Q1: Momentum, Milestones, and Market Expansion at Onate
As we bid farewell to the first quarter of the year, the team at Onate team took some time to reflect on Q1.
While Q1 started at a slower pace than anticipated, we are thrilled to share that momentum really surged as we navigated through February and March. Here are our highlights:
1. Ambitious Targets and Lending Opportunities
Setting ambitious targets for us as a group has been instrumental in propelling us forward. We seized lending opportunities presented by the dynamic property market, capitalising on our expertise to deliver loans to borrowers in a seamless process.
2. Maintaining Close Relationships
Our commitment to maintaining close relationships with our borrowers has proven invaluable. These relationships have not only helped us overcome the inevitable challenges, but have also fostered trust and collaboration, benefiting both parties.
3. Highlights and Achievements
Q1 was marked by significant milestones, including completing numerous loans for both new and existing borrowers. We have also taken proactive steps to enhance our offerings, such as reducing interest rates and introducing a fixed interest rate product. The latter will ease uncertainties if rate cuts do not materialise as quickly as initially was forecasted.
4. Refurbishing Residential Properties
We are excited to have advanced loans on tired and derelict residential properties, paving the way for their transformation into much-needed housing stock. Over the coming months, we look forward to witnessing the finished product once refurbishment works have been completed and the properties are fully let.
5. Expanding into New Horizons
One of the most exciting developments for the Onate team in Q1 was the opening of our office in Madrid. This expansion marks a significant milestone as we begin rolling out our loan offering in a brand new market. We are thrilled to embark on this journey of growth and exploration.
6. Looking Ahead
We are eager to continue assisting borrowers, where they may be experiencing funding challenges, in order to achieve their goals. With our expanded presence and unwavering commitment to excellence, we’re confident that exciting times lie ahead for Onate and our growing client base.
Join us as we embrace the opportunities and challenges that await, shaping the future of bridging finance and property investment together!
Team Tuesday: Meet our Lending Director in Spain - Juan Galobart Juste
Where did you begin your career?
“I began my career in finance as an intern with Santander Bank in the Leicester University branch. This was during the summer of my second university year. My main duties during those three months included informing new students about the benefits of opening a debit/credit account with Santander. I also helped out with welcome events and conducted surveys.”
What is the best career advice you’ve ever been given?
“The best investment is the one that requires you less attention and time; because of those you can have many”.
I will say that I like dynamism in my professional life. This statement motivated me to explore debt investment via direct lending, enabling me to participate in multiple transactions simultaneously.”
What tips would you give to someone starting in your profession?
“Be a good person and always keep your values in mind so you can grow your professional life in parallel to your personal life. I like this one from Ray Dalio: “Stay curious and keep learning. The world is constantly evolving, and so should you.””
What is your greatest professional achievement to date?
“Exiting a debt position where the asset collateral has been completely depleted, with no possibility of repayment from the borrower.
We managed to find a buyer for the asset, even though the buyer will have to claim against the insurance company and rebuild the full asset.”
Tell us something people may not know about you
“I was born in Madrid and consider it luck, but I like to go to the countryside regularly to recharge the batteries. I like to ride trial bikes and spend time with family to get away from the hustle and bustle. ”
Everything You Need to Know about Refurbishment Loans
At Onate, we are always looking to expand our product offering. Over the last few years, we have widened our finance offering to include advancing loans against both mixed use and commercial properties. Through interactions with borrowers and introducers who work with properties that require refurbishment works, we know that they require a finance offering that helps fund the refurbishment works in addition to the property purchase loan. This is what we refer to as a refurbishment loan.
What is a refurbishment loan?
When a property investor identifies a property to purchase that requires minor refurbishment, and the works are non-structural in nature, Onate can offer a facility in addition to the loan provided to purchase the asset. The promoter will agree the level of works that need to be to carried out and once Onate are satisfied with the breakdown of works and the costs associated with completing the works, a refurbishment loan will be approved.
How does it work?
The refurbishment loan is quite a straightforward process. If, for example, the borrower has a refurbishment loan of €300k approved, they will instruct their contractors to carry out the works. Once Onate are satisfied that the works are completed, the funds will be released to the promoter to pay the contractor.
The loan can be drawn down in multiple tranches. For example; if €100k of works are completed after a two-month period, the borrower can draw down an initial €100k after those two months and take the remaining funds once the rest of the works are completed.
What are the benefits of refurbishment finance?
1. Equity into the deal
The promoter will now have to put in less of their own cash into the deal. Previously if a borrower was to purchase a property for €1m, Onate would be able to lend up to a maximum of 70% LTV of the value of the property and the borrower would then have to fund the refurbishment works themselves. With our new product, we are now able to offer a facility to fund the works, in addition to the loan to purchase the property. In certain cases, we will be able to offer up to 100% of the cost of the works
2. Multiple drawdowns
Our flexibility allows us to offer multiple drawdowns. This will allow the borrower to only draw down the funds once they are needed. This ensures that the borrower is not incurring any additional costs in the event that the works are delayed and the full amount was drawn down before the works were completed.
3. Focus on multiple projects
This will enable experienced property investors to take on multiple projects, where previously they were restricted to moving from one project to the next as they had too much capital tied up in a single project. This will help bring much needed residential properties onto the market across Ireland more quickly.
With Refurbishment Finance, borrowers can access the funds they need to unlock the full potential of their properties and maximize their returns.
Whether you’re looking to complete a minor refurbishment or a major renovation, Onate can help.
Contact us today to learn more about Refurbishment Finance and how it can help you achieve your goals.
Case Study: Transforming a Pre '63 Property in Dublin
In the competitive Dublin residential property market, pre '63 properties—those built before 1963 and often subject to specific regulations regarding their conversion and use—represent unique investment opportunities. These properties can be particularly appealing to experienced property investors looking to renovate and either sell for a profit or rent out to tenants. However, the initial acquisition and subsequent refurbishment of such properties require significant capital outlay, not to mention navigating the complex legal and regulatory landscape. This is where Onate steps in, providing a loan offering that turns potential into profitability.
The Opportunity
An experienced property developer identified a promising Pre'63 building in Dublin. The property, comprising multiple units, was in a dilapidated state but located in a high rental demand area in Dublin city. The developer's vision was to fully refurbish the units to a high standard, making them appealing to modern renters, while preserving the building's historical character.
The Challenge
Despite the clear potential for a high return on investment, the project presented several challenges:
Difficulty in securing the property due to demand for these types of Pre’63 properties in Dublin
Substantial refurbishment costs, given the building's state and the need to comply with modern building standards from a fire safety and planning authority perspective
The need for quick access to funds to secure the property in a competitive market and commence work.
Onate's Solution
Onate offered a tailored financial package that addressed each of these challenges:
Transactional certainty, Onate is extremely well capitalised and funded from a broad base of several financial institutions
75% Funding of the Purchase Price: Onate agreed to fund 75% of the purchase price, significantly reducing the initial capital the developer needed to commit. This support was crucial in enabling the acquisition in a highly competitive market
100% of Refurbishment Costs Covered: Recognising the potential value uplift from the refurbishment, Onate provided 100% of the estimated refurbishment costs. This commitment ensured that the project could proceed at pace, without financial constraints hindering progress
Fast Funding Release: Onate's agile and efficient processing meant that funds were available quickly, allowing the developer to close the purchase and start the refurbishment without delay.
The Impact
The financial offering put in place by Onate had several positive outcomes:
Bringing a derelict property back into the property market: The developer was able to preserve a piece of Dublin's architectural history, updating it to meet the needs of contemporary residents
Economic Viability: The project became economically viable through Onate's funding, with the potential for a strong return on investment upon completion
Community Benefit: The refurbished units helped to alleviate local housing shortages, providing high-quality living spaces in a prime location
Repeat Business and Growth: The success of the project encouraged the developer to pursue additional Pre'63 properties, contributing to the growth of their portfolio and the regeneration of more areas within Dublin.
Conclusion
Onate's bridging finance solution demonstrates the pivotal role of tailored financial products in unlocking the potential of complex real estate investments. By providing substantial funding for both the purchase and refurbishment of Pre'63 properties, Onate not only facilitates derelict buildings being brought back to life but also supports experienced developers in bringing valuable, high-quality housing solutions to the market. This case study exemplifies how strategic finance can overcome significant barriers to entry, drive urban renewal, and contribute positively to the housing landscape.
If you're ready to explore new opportunities and need a financial partner who can rise to the challenge, contact Onate now:
John Ring | john@onate.com | 0878305276 or Michael Gavin | michael@onate.com | 0851454200
Choosing the Right Solicitor for Property & Lending Transactions
Choosing the right solicitor for property and lending transactions is crucial for a smooth and efficient process. Our tips (below) provide a comprehensive guide to selecting a solicitor, who is not only experienced in dealing with alternative lenders and conveyancing, but also capable of handling the specific needs of your transaction promptly and effectively.
1. Expertise in Property Lending and Conveyancing
Specialisation is Key: The complexity of property transactions, especially those involving alternative lending structures and SPVs (Special Purpose Vehicles), requires specialised legal knowledge. It's important to select a solicitor, who not only understands the legal landscape, but is also used to liaising with lender’s solicitors and understands their documentation and legal requirements.
Past Performance: Ask for case studies or references from past clients who had similar needs. This will give you an insight into the solicitor's ability to handle transactions similar to yours.
2. Seeking Recommendations
Professional Networks: In addition to personal contacts, consider reaching out to professional associations or networks related to property and finance. They can offer recommendations for solicitors who specialise in these areas.
3. Assessing Capacity
Direct Communication: When discussing your needs, directly ask about the solicitor's current workload and how they prioritise tasks. This can give you a clear picture of their capacity and dedication to your case.
Team Support: Understand who else might be working on your case and their expertise. In mid-size firms, it's common for a team to handle different aspects of a transaction, which can be beneficial for complex deals.
4. Transparent Fees
Detailed Quotes: Request a detailed quote that breaks down all potential costs and fees associated with your transaction. This should include any additional charges that might arise during the process.
Comparison: It's wise to compare quotes from several solicitors to ensure you are receiving a fair and competitive rate. However, remember that the cheapest option is not always the best when it comes to legal services.
5. Emphasising Speed
Proactive Steps: Before engaging a solicitor, prepare as much documentation and information as possible. This proactive approach can save valuable time once the transaction process begins.
Regular Updates: Agree on a schedule for updates and milestones with your solicitor. This keeps the transaction moving and allows for the identification and resolution of potential delays promptly.
Additional Considerations:
Technology Use: In today's digital age, solicitors who utilise technology effectively can streamline processes. Ask potential solicitors about their use of legal tech for document management, communication, and transaction management.
Cultural Fit: The solicitor-client relationship is pivotal. Choose someone who communicates in a way that aligns with your preferences and understands your business philosophy.
By following Onate's tips and considering these additional insights, you'll be well-equipped to choose a solicitor who can efficiently and effectively handle your property and lending transactions.
This careful selection process not only ensures a smoother transaction but can also establish a valuable relationship for future needs.
For more information, please contact:
John Ring | john@onate.com | 0878305276 or Michael Gavin | michael@onate.com | 0851454200
Case Study: Bridging Finance of €925,000 provided in North County Dublin
This case study explores Onate's commitment to finding solutions to complex borrowing scenarios and their approach to providing a €925,000 loan for the refinancing of a prime residential property valued at €1,700,000 in North County Dublin.
The property was a 5,000 sq ft plus former family home. It presented some unique challenges including a judgment mortgage and structural issues that had recently been resolved. Onate's innovative financing solution, including a 12-month loan with an element of interest roll-up, facilitated the debt settlement with a fund. This enabled the borrower to sell the property on the open market, maximising their return and capturing their equity in the property.
The borrower had been battling with a fund for a long period of time and eventually secured a debt settlement agreement in order to close out their position with the fund. They sought to refinance their prime residential property, their former family home, aiming to settle the existing debt. During the due diligence phase, Onate identified two significant challenges that could impact the refinancing process:
Judgment Mortgage: An outstanding judgment mortgage was discovered which the borrower understood had been discharged some time ago. However, it had only been partly resolved with the creditor and the judgment mortgage remained in place. The borrower and their financial advisor had to re-engage with this creditor in order to bring this matter to a conclusion and deliver the property free of the judgment mortgage.
Structural Building Issues: In recent years, remedial works had been carried out in order to resolve some structural issues. Due-diligence was undertaken by Onate to satisfy themselves that this had been resolved and would not impact potential purchase of the property or the value of the property.
Onate proposed a tailored solution to meet the borrower's needs and the property's specific challenges. This was a 12-month loan of €925,000 with an element of interest roll-up. This approach allowed the borrower to avoid monthly interest payments for the full term of the loan. This strategy was designed to provide time to sell the property on the open market, aiming for a maximum return.
Onate's tailored debt settlement and refinancing solution demonstrated a deep understanding of the challenges associated with high-end property transactions. Through strategic financing, Onate assisted the borrower in capturing the equity in their former family home through the sale of the property.
For borrowers, property developers and investors seeking financial partners who understand the intricacies of property backed transactions, Onate's track record of delivering results is a testament to its reliability and expertise.
If you're ready to explore new opportunities and need a financial partner who can rise to the challenge, contact John Ring john@onate.com or Michael Gavin michael@onate.com.
Case Study: Bridging Finance of €1.5m provided in the West of Ireland
In the dynamic landscape of short-term lending, responding to unique challenges is a testament to a company's success. This case study delves into how at Onate, showed flexibility and expertise when approached by an introducer with a time-sensitive funding requirement in early 2022.
The promoter, the current hotel operator was looking to acquire the hotel and 12 apartments in the West of Ireland. under the terms of his lease, the client had an option to purchase the entire property for €1.5 million. However, with a deadline tied to the option agreement and the inherent complexity of the transaction, the client needed a financial partner capable of swift action and a strong underwriting team who had experience with dealing with complex transactions
Recognising the urgency and complexity of the situation, Onate wasted no time and promptly issued terms. Upon payment of the due diligence fee, an all-party call was arranged. Leveraging the expertise of a solicitor on the Onate panel that had lots of experience with similar transactions relating to acquisitions , company purchases, and option agreements. Onate ensured that crucial tasks were frontloaded to eliminate potential delays.
The underwriting team at Onate worked closely with the promoters to expedite the collection and approval of all non-legal documents. A €1.475 million loan was successfully drawn down, reflecting a 62% Loan-to-Value (LTV) ratio. To further support the borrower's financial flexibility, a structured repayment plan was established, requiring quarterly capital repayments throughout the loan's duration. This strategic move aimed to facilitate an easier refinancing process with a pillar bank
The loan performed to terms, and the borrower demonstrated financial resilience by repaying the entire loan within the initial 12-month period.
This case study exemplifies how a combination of expertise, quick decision-making, and client-focused solutions can lead to positive outcomes in the dynamic landscape of short-term lending.
Navigating Fixed and Variable Rates at Onate
When it comes to choosing the right financing solution for your needs, one crucial decision you'll encounter on your financing journey is whether to opt for a fixed or variable interest rate. Both options are on offer from Onate and they offer distinct advantages. Here are the benefits of each:
Fixed Rate: Stability in Uncertain Times
1. Predictability:
One of the key advantages of choosing a fixed interest rate with Onate is the predictability it provides. Your interest rate remains constant throughout the agreed term, offering stability and allowing you to understand your cash flow better on a monthly basis. This predictability proves invaluable in times of economic uncertainty, ensuring your financial commitments remain transparent and manageable. You also have the peace of mind of not watching the European Central Bank announcements on the movement of interest rates and how this is affecting your loan.
2. Shielding Against Market Volatility:
Fixed rates act as a shield against market fluctuations. If market interest rates rise, your fixed rate remains unchanged, protecting you from potential increases in your borrowing costs. This stability can be particularly advantageous in a rising interest rate environment which we have experienced over the past 18 months.
3. No breakage cost:
Typically fixed interest rates attract a breakage cost and this is often a deterrent for borrowers to fix their interest rate. We are excited at Onate to be in the position to offer a fixed rate with no breakage cost. This is a really borrower friendly aspect to our fixed interest rate offering.
Variable Rate: Flexibility for Dynamic Opportunities
1. Potential Cost Savings:
Variable interest rates are often initially lower than fixed rates, providing an opportunity for cost savings, especially during periods of stable or decreasing interest rates. This can result in lower monthly payments and increased cash flow, enabling you to allocate funds to other aspects of your project.
2. Capitalizing on Rate Cuts:
With a variable rate, you have the potential to capitalise on market fluctuations. If interest rates decrease, so does your borrowing cost, leading to reduced overall expenditure on your bridging finance. This flexibility can be advantageous for short-term projects.
Choosing the Right Fit for You
The decision between a fixed and variable rate ultimately depends on your financial strategy, risk tolerance, and the nature of your project. Onate is committed to providing tailored solutions that align with your needs.
Whether you prioritise stability and surety of the interest bill on a monthly or seek flexibility and potential cost savings, Onate offers both fixed and variable rate options, ensuring you have the freedom to choose the financing structure that best suits your goals.
The key to a successful financing strategy lies in understanding your options and aligning them with your vision. Consult with our experts at Onate to explore the most suitable bridging finance solution for your project, and embark on your borrowing journey with confidence and clarity.
For more information, please contact:
John Ring | john@onate.com | 0878305276
Michael Gavin | michael@onate.com | 0851454200
Team Tuesday: Meet our Portfolio Analyst, Rónán Brady
Where did you begin your career?
“My first part-time job was stacking shelves in SuperValu, whilst I was in college.
It was a job I thoroughly enjoyed. I learned a great deal about interacting with customers, something that is very useful in almost every career.
Professionally, my first job was as a CRE Administrator in Pepper Advantage. I was fortunate to have great mentors that helped me at the start of my career”
What is the best career advice you’ve ever been given?
“Step out of your comfort zone.
Staying in your comfort zone will prevent you from becoming a life-long learner. Leaving your comfort zone will provide you with a platform to continuously develop new and existing skills throughout your career”
What tips would you give to someone starting in your profession?
“A strong work ethic and a willingness to learn will go a long way. Ask questions where you are unsure. People will have no issue giving any help you require, especially if they can see that you are putting in the hard graft.
Build and maintain connections wherever possible. It is only when you start working you realise the importance of a broad network. You never know when you may need to call in a favour!”
What is your greatest professional achievement to date?
“Graduating from college with a First-Class Honours Degree is something I take pride in.
At this early stage in my career, I believe that my best achievements are definitely yet to come”
Tell us something people may not know about you
“I am a GAA enthusiast. I play both football and hurling with my local GAA club in Meath”
Unlocking the Power of Bridging Finance: Equity Release
Are you a property investor looking to take your portfolio to the next level? Do you have equity tied up in your properties, but you're unsure how to access it quickly and efficiently? At Onate, we specialise in bridging finance solutions that can serve as a dynamic equity release tool for your property portfolio.
Bridging Finance: A Brief Overview
Before we delve into the benefits of using bridging finance as an equity release strategy, let's briefly understand what bridging finance is. Bridging finance is a short-term loan that provides you with rapid access to capital. It's often used to bridge the gap between two major financial events, such as buying a new property while waiting for the sale of an existing one or it can step in to refinance a project whilst a longer term funding solution is being secured.
The Power of Bridging Finance at Onate
So, how can bridging finance at Onate help you unlock the untapped potential of your property portfolio?
1. Quick Access to Equity: Bridging finance is renowned for its speed. At Onate, we understand that accessing funds in the property market can be time-sensitive. With our bridging solutions, you can access the equity in your properties swiftly, ensuring you don't miss out on lucrative opportunities.
2. Flexible Repayment Options: We offer flexible repayment options, including interest-only payments during the loan term. This can be incredibly advantageous for managing your cash flow effectively while leveraging your portfolio's equity.
3. Diversify Your Investments: Releasing equity from one or more properties in your portfolio gives you the financial freedom to diversify your investments. Whether it's expanding into different property types, regions, or asset classes, diversification can help spread risk and optimise returns.
4. No Early Repayment Penalties: At Onate, we often structure our bridging loans limiting early repayment penalties. This means you can repay the loan within a short period of time (typically after three months - without exit fees) and not pay prohibitive exit fees that other lenders charge for early repayment.
5. Seize the Opportunity: The property market is rife with opportunities, and timing is everything. With bridging finance, you can seize time-sensitive opportunities that might have otherwise slipped through your fingers.
6. Professional Guidance: Our team of experts at Onate is here to guide you every step of the way. We can help you assess your portfolio, determine the best properties to release equity from, and craft a financing offering that aligns with your goals.
At Onate, understand the intricacies of the property market and are dedicated to helping you make the most of your property portfolio.
For more information, please contact:
John Ring | john@onate.com | 0878305276
Michael Gavin | michael@onate.com | 0851454200
In The Media: Onate seals new €50m funding deal with NatWest
Onate is delighted to announce a €50m funding line from National Westminster Bank (NatWest), one of the leading financial institutions in the United Kingdom.
Onate CEO Dan Gashesha spoke to the Sunday Independent about the announcement:
This announcement was also featured on RTÉ.ie, Business Plus, Bridging & Commercial and Bridging Loan Directory
Case Study: Bridging Finance of €375,000 provided in County Dublin
In March 2023, a property investor approached Onate with an ambitious renovation project in Dun Laoghaire, County Dublin for €575,000. Onate swiftly crafted a tailored financing package, allowing the borrower to not only secure the property but also leverage their skills as a structural engineer to unlock its full potential.
The property in question presented a unique prospect. It was a large former retail unit with a residential house making up part of the property, but it required a comprehensive refurbishment. This property offered significant appreciation potential. The borrower, possessing expertise as a structural engineer, was well-positioned to identify the value-added opportunity that lay within this investment and had completed similar projects previously.
Crucially, the borrower had already gone sale agreed on the property when they reached out to Onate and was working through some title issues with their solicitor. Once the title issues were clarified, the pressure was on to complete the transaction rapidly. Within 24 hours of the initial request, Onate issued a term sheet for €375,000, representing a reasonable 65% loan-to-value (LTV) ratio. This expedited process allowed the borrower to proceed confidently with their property acquisition to close out the purchase.
One of the unique aspects of this financing arrangement was Onate's willingness to accommodate the borrower's financial situation. Given that the property required a complete overhaul, Onate agreed to retain interest for the first six months of the loan. This approach alleviated the borrower's concern regarding interest servicing until the seventh month when the property would be completed and generating income. The borrower had another residential property, which had been completed and was on the market. This property was successfully sold in August 2023, and the proceeds were strategically earmarked for repaying the Onate loan. Despite the loan's initial term set at 12 months, Onate imposed no penalties for early repayment, showcasing its commitment to flexibility and a client-centric approach.
With Onate's tailored financing solution in place, the borrower seamlessly navigated the acquisition and refurbishment of the property. As the property began generating income in the seventh month, it steadily contributed to the borrower's financial growth and long-term investment strategy.
For property developers and investors seeking financial partners who understand the intricacies of real estate ventures, Onate's track record of delivering results is a testament to its reliability and expertise.
Contact John Ring john@onate.com/0878305276 or Michael Gavin michael@onate.com/0851454200 for more information.
Why are Special Purpose Vehicles (SPVs) used for Property Finance?
Where property purchasers/developers want to obtain finance for projects, an SPV is typically used as it reduces risks and liabilities for the lender.
One of the primary reasons for the growth in limited companies being registered for buy-to-let purposes is the tax treatment. Instead of paying income tax as an individual, a limited company pays corporation tax.
What is an SPV?
An SPV is a legal company that is formed for a defined special purpose.
For property investors, an SPV is usually formed in order to purchase buy-to-let properties or for property development projects. The SPV is a separate company with separate assets and liabilities.
An SPV for property investment is usually formed as a private company limited by shares.
How to set up an SPV in Ireland?
An SPV limited company is straightforward to set up and is no more complex than setting up a standard limited company. You can direct your solicitor or accountant to set it up or alternatively you can set this up yourself through the Companies Registration Office (CRO) at a cost of €50.
As per a normal limited company, you must appoint a director, register an address and you will be given the relevant reference numbers.
Process:
Form A1 - This is the application form for the company formation. Furnish the necessary details about the company, directors, secretary, shareholders, and share capital.
Company constitution - Compose the company's constitution, which includes information about the company's purpose, internal regulations and governance.
CRO - Submit the completed Form A1, along with the required €50 fee, to the CRO electronically through the CRO Online Registration System (CORE).
Tax Registration – Irish SPVs need to register and pay tax to the Irish Revenue Commissioners through Revenue’s Online System (ROS).
Bank account – Required; company documents Including the certificate of incorporation, the company constitution, and the A1 form.
It is a straightforward process and alternatively you can engage an accountant to incorporate an SPV for as little as €120 including the CRO fees.
Why use an SPV for property investment?
An investor may choose to form an SPV to obtain finance on a property with limited liability.
They may also do so for tax purposes. This is because one of the key advantages of holding a property through an SPV is the propensity to attain a lower overall effective tax rate on the rental income generated from the property.
SPVs, Limited Companies and Mortgages: What you need to know
For property investors who decide to operate their business through a limited company, however, the reason for setting up an SPV is a little more complicated.
The lending policies of most mortgage providers mean it can be more difficult for a trading company (i.e. one which, in addition to owning property, conducts other trading activities) to obtain mortgage finance. It is usually far easier for a limited company whose sole business relates to the property to obtain finance. So, in order to access mortgage finance, it is usually necessary for property investors who use the limited company format to also set up an SPV for property investment and development.
In practice, the use of SPVs for limited companies has two main benefits: firstly, it makes obtaining financing more achievable and, secondly, it offers them the chance to claim mortgage interest tax relief.
Why alternative lenders prefer SPVs
Alternative lenders tend to prefer limited company SPVs because it is easier to understand the lending risks involved. For example, a new SPV for a property project will be a new business with no previous trading history. It will be free from any pre-existing obligations, debts, charges, and legal claims, which may otherwise affect a lender’s decision on an application.
How an SPV works: A case study
Assume that you are a building contractor and are already trading as a limited company. It may seem to make sense to purchase buy-to-let properties with a mortgage through this company, particularly as you would be able to claim mortgage interest tax relief as a result.
However, as this is a trading company with existing assets and liabilities, debtors and creditors, employees, etc., it may be difficult to find a mortgage lender willing to lend to you.
In this case, setting up an SPV for this purpose should enable you to access commercial property finance more easily.
Some other advantages of using an SPV
SPVs can have several other possible advantages, including:
Placing a property within an SPV can be used to separate and reduce business risk. If, for example, a trading company you own fails (or you wish to dissolve it), this will not affect the property assets within the SPV. Similarly, if a property SPV is unsuccessful it will not affect your trading company.
SPVs can provide a practical and safe way of working with other investors on a specific property project while keeping it separate from your other property projects or other businesses.
SPVs offer flexibility. It is possible to form several SPVs if you wish for different projects to remain independent of one another. An SPV can be formed for one or several related projects. The SPV can be dissolved when the property is sold and new SPVs formed for any further projects.
Placing a property within an SPV means that the property can be sold or transferred by selling or transferring ownership of the SPV.
It is important to note that the property in the SPV is subject to any future changes in legislation, including tax legislation, that may affect this kind of entity.
Summary
In summary, if you are considering your next property purchase or property development venture then using an SPV can offer many advantages. However, it is essential to take professional advice on the overall implications of using an SPV before going ahead so it is tailored and specific to your individual needs, risks, and opportunities. In a nutshell, the process involves setting up an SPV after you find a development, in order to isolate the asset and any risks involved with the purchase. After the property/development project is completed, you either sell it or you keep it, at which point you go through a formal process with your advisors to – if so desired – close that SPV down and possibly establish a new one.
This article was written in conjunction with Tom Heelan, Principal at Thrive Financial . For more information, please contact 087 9344655/info@thrivefinancial.ie.
To contact Onate about property finance, please contact John Ring at john@onate.com / 0878305276 or Michael Gavin michael@onate.com / 0851454200
Case Study: Bridging Finance of €1.4M provided in Dublin
Financing purchase of a residential development site
Financing solutions required with a week
In June 2022, Onate was presented with a unique opportunity by a property investor seeking to acquire a prime residential development site at auction in Dublin 18. This time-sensitive deal required efficient and creative financing solutions to secure the property within a week.
The property in question had full planning permission for the construction of 28 residential units. It was a strategic investment opportunity, but the auction date was just days away. The borrower needed a quick financing solution to secure this property. Recognising the urgency and complexity of the situation, the promoter met with Onate's lending manager. Together, they strategised on how to structure the deal most effectively. It was decided that releasing equity from the borrower's four bedroom residential property in Dublin 18 would be the most efficient approach. This property was already owned in an SPV and had no borrowings against it.
The residential property had an appraised value of €2.1 million, and Onate extended a loan of €1.4 million, representing a 71% loan-to-value (LTV) ratio. Within just two days of the initial approach, Onate issued a term sheet, enabling the borrower to participate in the auction confidently. The speed and certainty of execution provided by Onate played a pivotal role in securing the borrower's trust and facilitating the swift progress of the deal.
Once the residential development site was successfully secured at auction, the borrower promptly paid the due diligence fee. Onate's dedicated underwriting ensured that all necessary procedures were completed within the four-week deadline. The borrower had already arranged for overseas financing to fund the development of the acquired property and to repay the Onate loan. The certainty of repayment was factored into the loan structure, ensuring a clear and viable exit strategy. Onate's swift and flexible financing solution allowed the borrower to seize the opportunity presented by the auction, secure the development site, and proceed with their ambitious residential project. The loan provided by Onate was fully repaid within the 12-month term.
By tailoring a financing package that met the borrower's needs and navigating the 4 week timeline of the auction, Onate showcased its expertise in delivering financial solutions that drives success.
The Importance of an Efficient Property Valuation During the Lending Process
Our lending process is fast paced and simple. We make decisions in house and work with solicitors and valuers who have also bought into our ethos of completing transactions within tight timeframes.
All our loans are subject to a valuation being completed. If the valuation process is prolonged, this in turn slows down Onate’s lending process.
We spoke with Richard O’ Neill, Managing Director of Artis, on the key aspects of completing a valuation efficiently:
1.Understanding the circumstances of the loan and any time sensitivities around it: Our open line of communication with Onate allows us to prioritise cases accordingly. Understanding the situation fully means that we can advise Onate on the likely requirements of the report at the outset, which helps to save time in the long run.
2. Sharing and availability of information: The quick turnaround on valuation is hugely reliant on the relevant documentation and information being provided at the outset. This will typically include copies of leases and any tenancy schedules. It may also include copies of planning permissions and proposed construction costs. Onate has that for us at the outset of instruction, which saves us time and equips us to start drafting the valuation report sooner.
3. Valuer understanding of the market: We know the market that Onate typically lends into very well. We also have a huge level of market experience within the team so are therefore able to soundly advise Onate at the outset of instruction on the likely viability of proposed values. Similarly, given our experience in the market, we have access to a wide pool of comparable data across all sectors. This allows us to build and analyse valuation reports as soon as possible, without compromising on quality or accuracy.
4.Clearing up queries: Our strong relationship with Onate works well. When queries do arise, post instruction, then we are able to quickly raise, discuss and resolve the issue within a very short timescale.
To find out more about Onate’s lending process, call (01) 697 2588 or email hello@onate.com
Onate launches €100m Bond Programme
The Onate team is delighted to announce the establishment of a €100m secured note programme on the Vienna MTF operated by the Vienna Stock Exchange.
Coupled with its multiple senior institutional funding lines, Onate has strong diversity of funding sources and is well placed for further expansion of the business in providing short-term property finance for purchases, renovations, equity release and debt settlements secured against residential investment property, mixed use or commercial property.
Onate is already the third most active non-bank lender in Ireland, completing over 115 loans, totalling over €70 million, in its two years since launch.
Onate’s diversity of institutional funding lines, each of which sees all credit making decisions made in-house, sets them apart from many other non-bank lenders in their ability to execute at speed and deliver transactional certainty.
Onate has drawn €22m of the €100m permissible under the note programme and will continue to draw down funds as its loan book grows further.
Dan Gandesha, Onate CEO said:
“We’ve made our name in the Irish market by delivering a ‘fast yes or no and following through at pace’, regularly delivering property bridging loans in under ten days. We achieve this by making all our credit decisions in-house with our experienced team on the ground here in Ireland. The successful listing of this bond programme allows us to double down yet further on our singular focus of delivering much needed transaction certainty to property deals.”
From the Sunday Independent:
Case Study: Bridging Finance of €760k provided in Limerick
Equity Release Loan
Loan used for purchase and renovation of three properties
In the latter half of 2022, Onate received an inquiry to provide an equity release on a stabilized multi-let residential property in Limerick. The promoter purchased this property in 2021 and carried out a schedule of works in order to improve the property. Upon completion of the works, they were able to secure a long-term lease with a local authority.
The borrower then committed to purchasing three properties in Limerick that required a significant level of renovation and refurbishment works in order to bring them up to standard for local authority/Approved Housing Body leases.
Onate provided a facility of €760K, enabling the borrower to release equity. This helped assist the promoter to progress with both the purchase and refurbishment works on the three separate properties. Subsequently, within a nine-month period, the loan was refinanced with a longer term source of finance.
This case study highlights the significance of bridging finance in addressing funding challenges when faced by a number of projects at once. The property was recently refinanced with a longer term funding solution.
Team Tuesday: Meet our Underwriting Manager, Jenny O’Driscoll
Where did you begin your career?
“My first job was as a lounge girl in a local pub. I loved working in a customer facing role.
It was a great way to learn how to navigate various personalities which I think has really stood to me throughout my career to date”
What is the best career advice you’ve ever been given?
“Put effort into building good working relationships and if the occasion arises, do your best to help someone if/when you can.
Ireland is small and I’ve come to realise the property and finance industries are even smaller.
I come across the same people regularly so it’s always good to be able to call in a favour if you’ve helped them out with something previously!”
What tips would you give to someone starting in your profession?
“Ask as many questions as you need to.
Questions show willingness to learn and desire to do things right.
I have always been of the mindset that you’re better off checking than getting something wrong if it can be avoided”
What is your greatest professional achievement to date?
“I am very proud of my masters qualification.
DCU managed to find hours in my day I didn’t know I had and required a lot of hard work.
I believe this has set me up well for any future endeavours”
Tell us something people may not know about you
“I love cars. I spent many a weekend as a young child “helping” my dad in the garage behind our house.
I even did my transition year work experience as a mechanic.
Not a way many 15-year-old girls choose to spend their time!”