Funding options for property businesses
As the UK property market continues to evolve, landlords and property investors are increasingly looking to grow their portfolios to meet the rising demand for rental housing. It goes without saying, scaling a property portfolio can be capital intensive – so many landlords; particularly those operating through a limited company, are turning to commercial finance to support their expansion ambitions.
What is Landlord Portfolio Finance?
Landlord portfolio finance refers to borrowing solutions specifically tailored for landlords who own – or intend to acquire – multiple rental properties. As opposed to arranging several mortgages for each property, portfolio finance consolidates borrowing under one arrangement, easing the burden of managing multiple mortgages and often reducing costs.
This type of finance is suited to:
- Professional landlords with several buy-to-let properties
- Property investment companies and SPVs (Special Purpose Vehicles)
- Landlords looking to refinance a property and release equity for expansion
Commercial finance options available to landlords
Portfolio buy-to-let mortgages
Specialist mortgages products that allow landlords to secure funding against multiple properties under one loan agreement. Our panel of lenders typically require:
- A minimum number of properties (varies depending on the funder)
- Properties must be held in a limited company or a Special Purpose Vehicle (SPV)
- A proven track record of successful lettings
Benefits of portfolio buy-to-lets:
- Payments to a single lender simplifies your management of repayments compared to having multiple commercial mortgages
- Potential for more favourable interest rates through aggregated risk
- Provides you the ability to release equity within your portfolio
Commercial mortgages
If your portfolio includes mixed-use or commercial properties (e.g. shops with a flat above acting as the shop operator’s residence), a commercial mortgage may be more appropriate.
The level of rental income and your financial strength as the borrower are two key factors for lenders in commercial mortgages.
Benefits of commercial mortgages:
- Lending terms tailored to your unique commercial requirements
- Higher borrowing thresholds compared with other types of finance
- Interest-only commercial mortgages are available
Bridging loans
Bridging finance can be a useful short-term financing option for instances when you are looking to acquire properties quickly. Bridging loans are typically repaid through refinancing or selling the property for a profit.
Benefits of bridging loans:
- Fast access to capital
- Suitable for properties that require refurbishment before letting
- Can also be used to resolve cash flow gaps
Development finance
For landlords branching into refurbishments and conversions, development finance can support your project from planning, right through to completion. Lenders typically provide funding in staged drawdowns linked to build progress.
Benefits of development finance:
- Covers both your acquisition and construction costs
- Roll-up interest is available in development finance (interest is rolled into the principal amount, meaning it’s applied to the balance owing each month)
- Suited to large-scale portfolio growth strategies
Refinancing and equity release
Many landlords refinance existing portfolios to access the capital locked in their property assets. This allows you to access funds needed to acquire new properties, carry out refurbishments, or restructure any existing schedules of debt for your business.
Benefits of refinancing your property:
- Unlock equity in assets for reinvestment elsewhere
- Consolidate multiple loans into one, easing the burden of managing multiple debts
- Improve your portfolio cash flow
What do lenders look for?
To be successful in landlord finance, lenders typically assess the following factors:
- Your experience and track record as a landlord
- Structure of your business (e.g. is it a trading company, an SPV etc.)
- The value of your portfolio and expected rental yield
- Loan-to-value ratio – the amount you wish to borrow vs. the value of the property
- Your individual and commercial credit profile and history
Working with an experienced finance broker can help you present your business in the most effective light to find suitable finance tailored to your unique position and requirements.
Final thoughts
Whether you’re a seasoned landlord or an aspiring property investor, accessing the right finance is crucial in supporting your portfolio’s growth and success. In leveraging commercial finance, you are provided with a pathway to expand your commercial property operations without the necessity of over-leveraging your own capital.
At Mill Wood, we take pride in our process and our intimate relationships with a range of lenders and finance houses. It is our role to be as flexible as possible to help you find the most suitable finance to allow your business to flourish, sourcing tailored commercial finance solutions that align with your long-term investment goals.
If you’d like to learn about your landlord portfolio finance options, speak to an experienced broker today by booking a no obligation discovery call with Mill Wood here.
