Property investment finance

Commercial Finance and Insurance

Property, both residential and commercial, is a popular business opportunity for both developers and investors. It’s important to realize the distinction between ‘development’ and ‘investment’ as the method of financing activity can vary considerably.

Property ‘development’ is when a ‘property developer’ undertakes a project to build, or refurbish, residential or commercial properties for rental or for sale. The return the developer receives comes when the houses, offices or commercial units are sold or let. Property ‘investment’ is when an ‘investor’ buys one or more residential or commercial properties, usually for rental but sometimes for resale. Having bought the property, the investor’s return is either the ongoing income fromrenting it or the profit from selling it.

It’s often said that success in both property development and property investment comes down to ‘location, location, location’. It’s a maxim that means different things to different projects in different areas.The most basic question is, is it actually needed? If it’s a new development, will it be sold or let, or will it become an expensive white elephant with the developer unable to repay the loan. If it’s an existing property, either residential or commercial, is it in a desirable location? Will the rental income cover the hefty interest charges, fees and the property investor’s profit expectations?

It is these questions that successful property developers and investors give careful thought to as, apart from making it difficult to get finance, it can result in financial disaster.

Property investment finance

Residential properties
The financial difficulties associated with first-time buying means that renting accommodation is the only option for many people. The return on investment (‘ROI’) from renting out a house is particularly attractive compared to the relatively low interest rate paid on bank deposit accounts which has resulted in‘buy to let’ becoming a popular way to invest in the property market.

Residential mortgages are specifically designed to purchase a property in which the borrower intends to live and, although the investor is buying a house, they are intending to rent it to someone else. Buy-to-let mortgages are classed as a business transaction, are calculated in a different way to residential mortgages and generally incur higher interest rates and fees.For example, a deposit of 25% is usually required, Stamp Duty is 3% higher and owners are liable for capital Gains Tax on any profit derived from selling the property.

Despite this, providing the investor can fulfil a number of requirements, securing a loan is usually a straightforward,almost ‘tick box’, process. Instead of using the borrower’s income to determine the size of the loan, loan providers use a rent-to-interest (‘RTI’) calculation to determine whether the income from letting the property will cover the interest on the loan.

Commercial properties
As with buy-to-let properties in the residential property sector, the returns from renting out commercial propertiescan be equally attractive.

However, many other factorsaffect a commercial property’s rental value. Although demand remains a factor, the property’s location, its age, the length of its lease, the ‘asset quality’ along with any covenants the tenant may have to observe, all affect its desirability and, consequently, its value. The design life for a commercial property is often much less than it is for a residential property and, as the property nears the end of its life, it becomes less attractive and less valuable. As a result, securing funding for commercial property investment isusually not so straightforward as it is for residential properties.

How can One Financial Solutions help you?

One Financial Solutions is here to help you. We’ll talk to you about what you need and then introduce you to a specialist commercial finance broker who will work with you to secure a financial solution.

The commercial finance brokers we work with are acknowledged experts within the industry and have enviable relationships with a wide range of financial institutions throughout the whole of the market. They offer a complete service and can provide practical advice on all aspects of commercial finance. They can secure working capital, venture funding, development finance, bridging loans and asset-based finance schemes; help with business purchases and sales, including management buy-outs and buy-ins, and advise and assist with all aspects of share capital, proprietor loans, vendor deferment and mezzanine finance. They can also provide a lead role in liaising with all parties in these transactions including the financial institutions involved, accountants, specialized valuers and lawyers, and can write business plans, balance sheets, profit and loss statements and cash flow forecasts to support the proposal.

So, if you’re looking for help securing any type of commercial finance, please call us on 020 3714 9565, or ask us to call you by sending an email to admin@onefinancialsolutions.co.uk.

Residential Investment Property Finance

The overall returns on residential investment properties (often referred to as buy-to-let) make this sector attractive to investors when viewed against the current rates of interest paid on bank deposits.

We have a long established track record of arranging finance both for one off purchases and wider portfolio purchases or refinancing.
In all cases Bespoke Business Finance will look to identify the clients key drivers i.e.

Maximum Loan to Value – normally funding up to 75% – 80% can be obtained
Borrowing terms of up to 30 years
Interest Only funding if that is required
Minimise and/or improve upon existing interest rate and fee structures
Improve a client’s overall retained profit / surplus cash flow from their investments
Secure a funding structure that fits in with a clients’ overall strategy and ownership of the assets

Commercial Investment Property Finance

Yields on commercial properties currently make this sector an attractive investment when viewed against the current rates of interest paid on bank deposits.

When buying a commercial investment property, demand and value are influenced by factors such as the length of the tenant lease, the covenant of the tenant, the quality of the property asset, and its location. The funding solution that we negotiate for our clients and our choice of lender is also influenced by these factors. Identifying and securing funding for this sector is not as “formulaic or tick box” as residential buy to let funding.
The Bespoke Business Finance team, by virtue of many years experience in the corporate and commercial banking industry have the necessary experience and knowledge to secure a finance package that fits with the client’s longer term strategy for ownership and specific property characteristics that each deal presents.

In all cases Bespoke Business Finance will look to identify the clients key drivers i.e.

Maximum Loan to Value – normally funding up to 75% is available (higher if additional security is available)
Borrowing terms up to 30 years
Interest only funding if that is required
Minimise and/or improve upon existing interest rate and fee structures
Improve a client’s overall retained profit / surplus cash flow from their investments