Having Trouble With The Property ‘F’ Word?

The number one thing on property professionals’ minds (apart from the economy) is the ‘F’ word.

The F word? What am I talking about?

I’m talking, of course, about the holy Grail of property investing-Finance. For today’s post I thought we would tackle this subject in greater detail and hopefully give you some other ideas about financing deals in the current market.

After the demise of the NMD or ‘no money down’ deals of the last couple of years many investors are left wondering:- where did all the money go?

Just a year ago we are awash with cash being flung at us in all directions on low interest rates, with no real tie in’s. Lots of investors are now bemoaning the fact that even though the banks allowed and encouraged them to build huge portfolios, which in many cases were built using very little if any money put into the deal, that the very same banks have now completely flipped the market on it’s head and decided that they don’t want investor money after all. They created the monster which they are now frantically trying to chain.

Banks are on damage limitation mode. They have made the mess ( and what a fine mess!) and now have to find as many ways as possible to limit losses. So, of late we have been staring down the barrel of the loaded gun of very strict criteria; no lending to those of more that 10 properties (!), high entry fees, high early exit fees, loans called in for no real reason, high interest rates and fixed locked in time scales. Quite a lot of ammo there then, which is why so many investors have been playing the waiting game. The frustrating thing from an investor point of view is seeing all those potentially great deals at very cheap prices and not being able to get the finance to do the deal.

So, if you are feeling stuck for finance options what can you do? Well, here are some other ideas to get your property investing juices flowing again.

1. Private Equity Finance - the grand-daddy of finance, flexible and VERY useful in this kind of dead market.
2. Re Evaluating Your Portfolio – to see if your existing can be re-arranged and financed differently as a whole.
3. Commercial Finance – tricky to achieve and based on more of a business plan, can be expensive, but sometimes useful.
4. Networking - so you can look for new partners to work with who may be in a better position than you financially.
5. Bridging Finance-for a quick in/out deal which can be then underpinned with a mortgage.
6. Joint Venture - with those of less property or as sleeping partners, or with those who have money but not time perhaps?
7. Foreign Mortgages-get your tax liabilities off shore via an SPV ( offshore company) then use it to buy with foreign cheaper mortgages for UK property.

I hope this blog post will help to focus investors on where else they may attempt to fund their deals, or at least give them a few ideas as to how to adapt to the current crisis and market conditions enabling them to still move forward with their property businesses.Property is a trade where you have to learn to adapt to market trends and conditions. This is one such time. Don’t let it stop you doing cracking deals.

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