Financiers urge landlords to release equity

Cardiff-based property financiers Kingswood Associates is calling on landlords and businesses to release finance from their properties while there is still time.

The firm says it has become significantly harder for landlords to refinance in the current market and has found that many property investors have begun the process expecting difficulty.

Kingswood says that with house price growth stagnant or declining, negotiations can be more aggressive and below market value deals easier to source.

It suggests that by using equity built up in a buoyant market to purchase extra properties during a period of uncertainty, landlords can grow their portfolio at a much greater rate, acquiring properties at a lower price.

John Phillips, managing director of Kingswood, says: “If you own a portfolio of properties which is either highly geared or you are looking to borrow money for additional purchases, it would be wise to remortgage them as soon as you can.

“As the market tightens up and borrowing becomes more expensive, you should raise the finance you need before it’s too late. Many of the more serious and professional investors have already begun this process, using the credit crunch to their advantage.”

Kingswood says credit checks are more stringent, with County Court judgements, previous bankruptcies and missed mortgage payments impacting on how landlords source finance.

Not only are lenders stipulating the type of tenants a property can house, but many are restricting the property type itself, with city centre new-build flats proving particularly difficult to raise loans for.

Phillips says: “With uncertainty in the financial markets, banks are reluctant to lend to one another, making funds more expensive and harder to come by. Lenders without access to new funding lines are closing the door to new business and those with cash reserves are becoming increasingly selective.

“This advice should be considered by all businesses, not just landlords. Any business that owns property, from a small shop to a large industrial site, should look at their properties now. Releasing equity would help their business avoid problems during any potential recession, because the golden rule – as always – is that cash is king.

“During this time it is vital that an investor or a business works with an experienced broker, using their knowledge and relationships with lenders to source the best deal. There are still some great rates available.”