| | Buy To Let Commercial Mortgage - A Growing Opportunity.
By Chris Clarke. In the not so distant past the term "buy to let commercial
mortgage" would have been synonymous with "residential
commercial mortgage". This is because many lenders and brokers
regarded buy to let mortgages as commercial propositions.
Many property investors now consider a good mix of residential
and commercial property to be a requirement of a well managed
portfolio. This change in demand has forced the market to adapt,
buy to let commercial mortgages are now one of the fastest areas
of commercial lending.
When considering the range of commercial investment property,
the main types of buy to let commercial mortgage products can be
defined generally under the headings 'blue chip', 'premium',
'secondary' and 'speculative'.
The highest quality of investment property would be the "blue
chip" investment. These properties will have very good quality
tenants on a long lease, as well as occupying the best location.
Because of the stability of the tenant these properties become
very attractive to the institutional investors, resulting in
slightly inflated values. These higher values can put pressure
on the buy to let commercial mortgage by reducing yields.
Premium investments would typically be very similar to blue
chips, with perhaps the exception of the quality of the tenant.
Instead of a well established business, such as a national chain
or franchise, the tenant would still expected to be of high
standing. Because the values of these properties are more
realistic they can offer more attractive rental yields,
resulting in more interest from smaller investors.
When examining 'Premium' buy to let commercial mortgages
lenders will question the experience and financial standing of
the investor. The lender will ask can the borrowing costs still
be paid in the event of the tenant defaulting? this is
particularly important and the valuer may well be asked to
comment on the likelihood or otherwise of finding good tenants
quickly and easily. Due to this potential for risk, a lender
will also be interested in verifying the stability and
reliability of the tenant(s).
Not surprisingly, speculative investments are the hardest to
fund. Very often the property is not pre-let, may be in need of
repair or refurbishment and may not even be in a good location.
For these reasons a lender will expect the borrower to have the
means to support the buy to let commercial mortgage from Day One
- and evidence of this will usually be required.
High street banks and building societies are most likely to
favor the blue chip or premium propositions, They usually reward
solid investment opportunities will very low interest rates and
terms.
Commercial buy to let investors seeking funding for the
secondary type of properties have historically struggled to find
funding at sensible rates, the challenge was being able offset
the renal income against the higher interest rates from the
banks. Competition in this sector is bringing rates down though.
Speculative investments continue to be a specialist area, and
unsurprisingly there are still few lenders prepared to back
these deals unless they are confident of the borrowers ability.
Buy to let commercial mortgages are helping a new breed of
property entrepreneur seize opportunities. Obviously caution
still needs to be exercised when assessing the profitability of
any commercial property investment.
About The Author: When searching for a buy to let commercial
mortgage it is vital to talk to someone with experience in dealing with the full range of commercial property types. Spectrum Business
Finance have been arranging commercial finance for over 5 years
and have the experience to help in almost all circumstances.
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