Investing in a property deal of any scale is inevitably big news for those concerned. The amounts of money involved in property transactions mean it is common for third party finance to play an important role. From securing the funding to start the project, through to mortgaging the property for its eventual purchase, banks and mortgage lenders are involved throughout the process.
This has a number of direct upshots, including the fact that the lender is effectively a gatekeeper, determining whether your investment project can go ahead. There are a few things to consider when you are raising finance for a property deal, with a view to giving yourself the best possible chance of raising the funds required.
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When you are trying to secure finance for a property deal, it helps to have some capital at your disposal that can be used as a deposit. Banks are far more willing to lend in situations where they are absorbing less of the risk themselves. By putting some money up front alongside the loan arrangement, you improve your chances of being seen as a viable prospect for the lender. Aim for somewhere between 10–25% of the total amount you are looking to raise. Depending on the existing relationship you have with the lender, you may require the upper end of this scale to get the commitment you need.
If you are borrowing as a limited company without an established financial track record, you can expect to be required to give a personal guarantee against the funds, in addition to a security over the investment assets tied to the loan agreement. Lenders need to cover their backs in the event of non-payment, and these guarantees and securities are the best way they can tackle these risks. This makes it easier to secure the funding you need for your property deal to get off the ground.
If you are developing property, it may be useful to be able to raise finance against a range of your existing assets. This can help you gain maximum leverage, for increasing the size of your property investment portfolio. So long as you have a solid business case for your development that is realistic and viable, this should be seen as an effective way to tackle bigger projects, and to raise the funding necessary for these deals to happen.
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Property deals rely almost universally on finance from one party or another, whether it is houses for sale or commercial property for rent. This means that banks and lenders are an essential part of the process. When you are starting a new project, securing the funding to get things off the ground is essential. If you are buying a property for investment purposes, you may also need to think about the mortgage, and in any event the business case for your decision to borrow in this way. By making yourself as appealing as possible to lenders, you will find it becomes easier to secure the finance you need.