Top 10 Title Splitting Mistakes Property Investors Make
Are you a property investor looking to maximise your returns? If so, you’ve likely heard of title splitting. But did you know there are common pitfalls that could be costing you thousands, or even millions, of pounds? Many property investors are leaving significant profits on the table by making a few simple, yet critical, mistakes. This guide will walk you through the top 10 mistakes to avoid when title splitting so that you can unlock the full potential of your property investments.
1. Not Understanding the Difference Between Investment and Comparable Valuations
This is the number one mistake, and it costs investors a fortune. Unsplit properties, such as multi-unit blocks, land developments, or commercial-to-residential conversions, are valued differently from split properties. Unsplit properties are often valued using a “rent and yield” calculation, similar to large HMOs. This means the valuation is based on the rental income and the yield it produces, which can result in a significantly lower valuation, especially if rents haven’t been maximised.
2. Failing to Realise the Power of Comparable Valuations
Once a property is title split, its value is determined by comparable sales in the local area. This is because each individual unit can be sold to a retail buyer, a person like you or me looking for a home, not just another investor. These retail buyers are willing to pay more, which drives up the overall value of the property.
For example, a property valued at £6.5 million as an unsplit block could be worth £7.96 million after a title split, representing a potential profit uplift of £1.49 million.
3. Relying on Dangerous Bridging Loans
Some mortgage brokers might offer you a bridging loan based on a high Gross Development Value (GDV), but they may not have an exit strategy in place. This can leave you “stuck on the bridge,” unable to refinance and forced to pay high interest rates. The right brokers will have a solid plan for your exit finance before you even take out the loan, ensuring you can get your money out of the deal.
4. You can’t find a Solicitor who can do the Title Split
Many people believe they have to wait until they sell a property to title split it. This is not true! By waiting, you are delaying access to a significant capital uplift. This money could be used to fund your next property deal, and delaying the split means you miss out on years of potential capital growth.
5. Believing a Title Split Isn’t Possible
A solicitor may tell you that a title split isn’t possible for your property. In most cases, this is not a legal impossibility, but a lack of understanding of the correct process. It’s your job as the investor to understand the process and guide your professional team.
6. All you need is a Solicitor?
While a good solicitor is essential, they are only one part of the puzzle. Training companies that tell you a solicitor is all you need are often misinformed. A successful title split requires a team of professionals, including surveyors, architects, and a great finance broker.
7. Not Title Splitting on the Day of Purchase
It is a common misconception that you cannot title split on the day you purchase a property. This is simply not true. With the right knowledge and process, you can complete the title split at the same time as the purchase, allowing you to unlock capital and create more profitable opportunities from day one.
8. Taking a Broker’s Advice Not to Split
A finance broker might advise you against a title split, suggesting a commercial mortgage instead. While this might be the easiest option for them (as they get paid on the commission), it’s not the most profitable for you. A commercial mortgage on an unsplit property will not give you the same capital growth as a title split property.
9. Assuming You Can Split When You Sell
This is a critical mistake. Most banks will not let you reduce their security one flat at a time. This means if you have an unsplit block with a commercial mortgage, you’ll likely have to sell the entire block to another investor at the lower block value. Even if you manage to sell one unit, you will have a “broken block,” which is extremely difficult to refinance.
10. Ignoring the Importance of a Strong Strategy
Title splitting isn’t something you can do on the fly. You need to have a clear strategy and a team of professionals in place before you buy the property. Understanding these pitfalls will help you avoid costly mistakes and set you on the path to becoming a highly successful property investor.
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Don’t let these mistakes cost you your profits. We can help you navigate the complexities of title splitting and give you the knowledge to get a minimum of 25-35% capital uplift, 60% more cash flow, and MIMO (Money In, Money Out) on every deal.
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