Commercial Watch: Investors piling into commercial properties


Investors are venturing into mixed or commercial property
as they discover funding is easier to obtain than they thought

As appears to be the case for many brokers who speak with us, we have seen an increase in enquiries about limited company buy-to-let. Part of the reason for this must stem from the recent tax changes announced by Chancellor George Osborne.

There are, of course, many solutions for such enquiries but some investors are seeking more alternative answers. This includes for purchase of property requiring refurbishment/extension/renovation work where they can add value to their portfolio by increasing capital values, irrespective of whether they are suffering directly from the tax changes.

An increasing number of investors are even venturing away from traditional buy-to-let into mixed property or commercial property investments, where rental yields can often be higher but where they have historically been put off by the perception that funding such types of property is much more difficult.

It is true to say the process is more involved but the actual availability of finance, particularly for experienced property investors, is more widespread (and usually a lot less painful) than many realise, when using the right broker.

Where refurbishment or renovation is needed, many people have come to realise that bridging finance is not the last resort it was once perceived as but a relatively straightforward means to an end in the majority of cases.

Borrowers can get their hands on a property in weeks (sometimes days), rather than months, before someone else snaps it up. If required, we can also obtain an agreement in principle for the exit finance (assuming retention is the ultimate aim) so that, the moment the works are complete, we can gallop down the home straight to ensure the bridging finance is not utilised for a moment longer than necessary.

Examples of what is available for refurbishment are as follows:

  • Straight purchase of a residential investment property for light refurbishment where the client has the funds to carry out the works: Up to 75 per cent of current value at 10.68 per cent per annum with no exit fees.
  • Purchase and light refurbishment funding: 75 per cent of current value, plus up to 100 per cent of refurbishment costs in two to three stages to a maximum 70 per cent of the end value, at 13.2 per cent per annum with no exit fees.
  • Heavier refurbishment funding and even true development finance: This is available to more experienced applicants at 75 per cent of all costs with rates as low as 6.25 per cent in many cases, albeit with exit fees up to 2 per cent of the loan amount. Ninety per cent of costs is also available but at higher pricing, as you might expect.

There are obviously many other solutions depending on the exact nature of the case and the status of the applicant.

Bridging at these sorts of rate is also available in many circumstances, even for commercial and semi-commercial property, to 75 per cent of current value provided the deal makes commercial sense to the funders.