Posts Tagged ‘property’

Property Business Investment Loans – Making The Right Choices

December 4th, 2018

In recent years bricks and mortar or property investments have become an attractive form of investment yielding attractive returns. Good profits have been made by business minded people who have been prepared to speculate in a property portfolio investment.

Residential buy-to-let properties have made up the bulk of these investments but there is a strong move towards 2nd properties for holiday and short-term lets. Commercial properties have followed a similar suit and appear to be propping up the pack in terms of investment yields in recent years.
Property business investment loans are now available and support the fact that property has perhaps been the most consistent of all asset classes over recent years in terms of inflation busting returns.

However property can be regarded as a finite asset which can also be a problem given its popularity with investors – therefore it is vital to find decent properties and finance that will enable a portfolio to continue to grow in value. Supporting this notion, on one side investors should attractive properties that are not over-valued and with good quality tenants. On another side the returns should support the investment outlay and where possible not leave the investor under-water in terms of annual outgoings.

There are an increasing numbers of lenders who have mortgages tailored specifically for the buy-to-let market those which provide essentially property business investment loans.
Property business investment loans (Buy-to-let loans) are often no higher than between 75% and 85% of the value of the property considered. This is calculation is known as the loan-to-value ratio. So if you are considering the best loans and choice aim to put down a deposit of around 25%. Even the best landlords experience periods when they have no tenants. It is therefore prudent not to over-stretch your finances. Ideally rental income should ideally be at least 130% more than your mortgage payments.

The rate of interest for property investment loans

Although there is a lot of competition for your business, interest rates are usually slightly higher for buy-to-let loans and maybe higher for business investment loans. Expect to pay around 0.5% – 1% above a normal standard variable rate for the privilege of buy-to-let finance. Having a bigger chunk of deposit will improve the chances of getting a lower rate which is a useful consideration if you plan to pay off the property earlier.

The best type of mortgage for property investment loans

Carefully shop around for the best mortgage deal and consider the type of loan that will work best for you. Your choice between a repayment or interest-only mortgage will reflect your expectation of what you want to paying off the loan at the end of the term.

Many property investors like the security of fixed rates so that they know exactly what their monthly payments will be and this enables them to plan ahead. A flexible mortgage may also be popular, as it has the ability to overpay when the property is let and take payment holidays or make smaller payments when it is not. As with standard domestic mortgages and good property investor should always be prepared to move the mortgage or property investment loan when an advantageous financial incentive of mortgage offer runs out.

Property Portfolio Business Investment Loan

June 14th, 2018

The ability to invest or not invest in your property portfolio may perhaps be essential to future growth, development and the overall success of your business. A property portfolio business investment loan, maybe available to customers seeking to borrow amounts in excess of £25,000. Loan of up to £250,000 are available A business investment loan is a good tool to fund expansion and offers investors a simple and flexible way to fund planned growth in their core business. The investment is typically assured against other property investments or capital but options for unsecured funds may also be possible.

A business investment loan works by providing loans suitable for individuals or companies owning freeholds or leaseholds on existing properties from which they either invest or operate (i.e. owner-occupied commercial property). An example of where this may benefit a property portfolio is that it can enable individuals or businesses to purchase fixed assets either for business purposes. Other examples maybe where the portfolio purchases business premises on owner-occupied basis, or assists to acquire businesses that complement the existing activities of the company. Second home loans also operate in a similar way, where they support investment in second properties by using collateral locked up within existing properties.

The benefits of a business investment loan are numerous and include; Flexibility – where investors have ability to use free equity in their property portfolio to invest in their business. Choices – where a range of flexible repayment options may be available to support such investments. Adaptability – where loan repayments are adapted to suit the cash flow needs of the property portfolio. Manageability – where investments are easier to manage and planning for budgets and future expansion are controlled with options for fixed interest rates to protect against interest rate hikes. Other benefits include interest only options from 1 – 25 years.

Important elements to consider when applying for business investment loans.

    1) Understand the variable and fixed rates available to your investment – it maybe in your interests to search around or negotiate the best deal which maybe fixed, flexible or a combination of the two.
    2) Determine the length of your loan. The maximum period is typically 25 years. In specific cases in may be in your interests to pay off the balance early e.g. to use profits. If this is the case then carefully consider the risks of redemption penalties.
    3) Understand the types of repayment and select the most appropriate to your investment. Two types of repayment typically appear a) Interest only b) Capital and interest. In the latter the loan is cleared off whereas with the former the original loan value or capital value is still outstanding at the end of the finance.
    4) Consider alternative sources of finance e.g. Secured loans, Second home loans. Consider the interest rates, flexibility, simplicity and control of these investments against business investment loans.
    5) Consider the fees for setting up a business loan versus other forms of secured loans. Business loans tend to be more expensive and also require larger collateral than home loans. Always measure and compare the different sources of finance and consider all elements in the costing of the loan and not just the monthly repayments.

In summary, property portfolio business investment loans are available through many banks and financial institutions. The bigger picture of loan costs should be considered in the equation to understand not only monthly repayments but also short term and long term costs overall. Carefully compare other sources of finance before negotiating and agreeing loan terms.