What Does BMV Mean In Property Investment?
BMV stands for Below Market Value.
It describes a property bought for less than its assessed open market value. The term is used constantly in property investing circles, and rather loosely, which is where problems with lenders begin.
What Counts As Genuinely BMV?
Negotiating a discount off an asking price is not the same as buying below market value. Asking prices are aspirations. A RICS surveyor may well conclude that the price you negotiated is the open market value, because the market is what someone will actually pay, not what the vendor hoped for.
Genuine BMV purchases usually involve a reason the vendor accepted less than the property would achieve on the open market with normal marketing:
- Auction purchase
- Repossession
- Distressed sale
- Cash sale or fast completion required
- Probate
- Large portfolio or bulk sale
- Off-market sale
The common thread is speed or certainty being worth more to the vendor than price. That is what creates a real discount, and it is what a valuer will accept as an explanation.
The Six Month Rule
This is the single most important thing to understand about financing a BMV purchase.
Most lenders will only lend against the purchase price, not the valuation, for the first six months of ownership. So if you buy at £120,000 a property worth £160,000, a 75% LTV mortgage in month one gives you £90,000, not the £120,000 that 75% of the true value would suggest.
The discount is real, but you cannot immediately borrow against it. Practical routes around that:
- Wait out the six months, then refinance against the valuation
- Use a lender that permits day one refinance at value. A small number will, where the discount is genuinely evidenced
- Use a bridging loan to buy, add value through works, then refinance onto a term facility against the improved value
The third route is the standard BRRRR approach (see BRRRR). Refurbishment work generally gives a valuer a much clearer basis for uplift than a claimed discount does.
Evidence The Discount
If you want a lender to recognise a BMV purchase, document why the vendor sold cheaply: auction particulars, probate correspondence, marketing history, or evidence of the condition at purchase. An unevidenced claim that a property is worth more than you paid rarely survives a surveyor’s report.
Related: CMV, OMV, 180 day value.
Read more about buy to let mortgages, bridging finance, or speak to us about a purchase.
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