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  • Commercial Property

    Commercial Property Mortgages

    Hi

    I have a couple standard BTL properties and got a little bit of a deposit to maybe purchase another property. I would like to diversify into commercial property.

    Has anyone recommend/used a commercial mortgage broker or some thing like that? As this is the first commercial property i would be buying i just need to how they work and differ to residential mortgages.\

    All help and advice greatly appreciated

    Thanks

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    In my view commercial property splits into five main funding categories.

    1) BLT+ (as I call it) where the amount of resi is larger than the commercial (imagine shop with 2 flats above)

    2) Development funding

    3) Single asset Commercial property (this can be owner occupied or investment property)

    4) Specialist property funding eg hotels, doctor's surgeries, race tracks, etc

    5) Large scale where the size breaks the parameters of all the usual brokers' products and it is a deal which cannot use mortgage products but need debt structuring (this could be say a £100m office block or £500m three phase resi development. Here it is not just banks but insurance companies that provide the funding sometimes with structured bonds.

    This is in order of complexity and with each category having different solutions. The first two and some of three are led by products and so your choice of broker should ensure product understanding. For the others it is about understanding how to structure a deal.

    All funding is broadly the same. What is the cashflow to service the payments (eg rent) and what is the risk to asset values.

    I strongly suspect that unless you are pooling your funds you are looking at (1) or possibly (2) in which case it should not be that challenging to find a broker to suit your needs.

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    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022


    The amount, term, type and pricing of a commercial mortgage will generally be determinded by the following:

    • who is the borrower and what is their commercial property experience
    • what type of commercial property is it (i.e office, industrial, retail etc etc)
    • who are the tenants
    • how much rental income are they paying and for how long
    • when are the tenants making those rental payments (monthly or quarterly)
    • what type of commercial leases document the above, Full repairing and Insuring (FRI) or licences
    • how likley are those tenants going to keep on making those rental payments (usually called the tenant covenant)

    Commercial mortgages can also include both financial and non financial covenants.



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    Proplend Borrower Team
     
    T: 0203 637 8418 |  http://www.proplend.com
    15 Little Green, Richmond, TW9 1QH