Good old bricks and mortar have always been popular when it comes to investing. Why? For one, UK properties in high demand can generate large amounts of revenue. This growth allows buyers to consume additional equity upon selling.
But there are plenty of other reasons to invest in property:
- Property can deliver high capital growth
- Holds value in times of crisis
- Generate rental income
Typically, property buyers go straight to a mainstream lender to seek finance options. However, alternative lenders appear to be becoming more popular on the property investment front. Back in 2017, the alternative finance market grew by 35% over 12 months. According to Forbes, the industry saw a rise from £4.6bn in 2016, to £6.2bn.
The current climate holds a good example of when traditional lending might not be best suited for your investment needs. High street banks have tightened their criteria, with many still withholding high LTV mortgages from the shelves.
Why the rise in demand for fast bridging loans?
The rising demand is being fuelled by government incentives, the Stamp Duty Land Tax holiday being a key factor. In July alone, £37 billion worth of property sales were agreed. According to Rightmove, this represents a year-on-year increase of 38%. Buyers are clearly taking full advantage of the opportunities on offer.
Traditional lenders can take, on average, between 110 – 130 days to complete. For many clients, that’s too long. Whether you’re a property investor, buy-to-let investor or even an overseas client, you might want to get a clearer understanding about how a fast bridging loan might best suit your needs, and what to look for when choosing a lender.
This is the key element when it comes to seeking finance. If you’re a property investor, asking your lender about their funding lines before applying for one of their loans should be at the top of your Q&A list. It can give you a better understanding of how quickly they are able to provide the funds. As buyers return to the market, competition is starting to heat up, making timing crucial.
Finding lenders with established funding lines is a great place to start. This means looking for lenders with in-house funding, as well as established, long-term and diversified funding lines. This could mean that the lender has individual investors, Hedge Funds, Pension Funds, Family Trusts and global investment banks all providing funding for their borrowers.
It is important to also look at those those who have had long standing relationship with their funders, both individual and institutional, as that relationship can bring stability and reduce the likelihood of funding being pulled in times of uncertainty.
Locating the Right Lender
Many brokers and borrowers have been left feeling let down by traditional lenders and this comes down to the uncertainty in their funding lines, but also the speed in which they are able to respond to enquiries.
For property investment, speed is everything. Competition is growing, and many buyers are racing back to the front lines to release their pent-up demand for property. Buyers need to be sure that their lender won’t be the one holding them back. Loans that take too long to deploy put deals at risk of collapsing, so buyers need to be sure to look for lenders who pride themselves on speed, simplicity and above all, security. This not only protects the future asset but also the deposit.
But how can you know? A company’s track record will be visible. Buyers can look for reviews, testimonials and read up on their case studies, to see if they’re the right fit for the circumstances.
Find what works best for the project
There are always good property investment opportunities around but finding them can be difficult. The current climate has opened many doors, as uncertainty sent tremors across the market at the start of the transition out of lockdown.
Online auctions made a great stance in the market and the average spend per property has increased. Auction houses can be a great place to find investment opportunities, particularly if you’re interested in refurbishment and conversion opportunities. Buying cheap and renovating may take longer than buy-to-let, but the rewards can be equally is not more…well, rewarding.
As we’ve all seen, Coronavirus has affected many industries in different ways. As property investment hotspots start to change, it’s exciting to see where it may be going. Our surveys from last year indicated a rise of property investment interest in the Northern cities, but since the pandemic, countryside suburbs are becoming increasingly popular.
Like any investment, there is always a risk. But with the housing crisis still in motion, the stamp duty holiday ongoing, and plenty of opportunities popping up in the big cities, a steady rise looks to be back on the horizon. If you’re a broker interested in specialist finance, register with MFS for the latest company updates.