There’s no escaping the fact that we are about to enter a difficult period. The Bank of England has suggested the economy is entering a lengthy recession, with inflation likely to remain high for some time.
Inevitably these economic challenges will have a significant impact on the housing market, not just on those looking to purchase their own home but also on property investors.
Some landlords will be heading for the exit. They may see this as the opportunity to cash in on their investment and crystallise the profits they have made.
Their peers may see the incoming rules around minimum energy efficiency standards for rental properties and conclude that they are either unwilling or unable to make the necessary changes to their properties to meet those standards, and also elect to sell up.
Yet others will see the current situation as an opportunity, a time to add to their portfolio rather than shrink it. But what will be the best way to go about funding those purchases?
A bridge to profitability
The good news is that there are plenty of borrowing options open to property investors who want to move quickly when purchasing opportunities arise.
When time really is of the essence, or the property requires work to bring it up to the required standard, then a bridging loan can be particularly effective.
While it can take weeks – or in some cases even months – to secure funds through a traditional buy-to-let mortgage, with a bridging loan you could raise the money needed for the purchase within just a matter of days.
Investors can then carry out any refurbishment work needed, before refinancing to a regular buy-to-let loan and paying off the bridging loan.
The full suite of buy-to-let
Other landlords may want to take a different route. It may be that refinancing an existing investment property, which is leveraged at a low level, releases the funds needed to pick up a new property, for example.
While this will involve a short-term cost, if both investments succeed over the long-term then the landlord will enjoy much healthier profitability overall.
Alternatively, landlords who are making use of portfolio finance may want to release some of the equity held across that portfolio, and then devote that money towards the purchase.
Portfolio mortgages have become much more commonplace in recent years, particularly among landlords with larger portfolios, and offer an excellent level of flexibility when it comes to raising the funds needed to expand that portfolio.
The reality is that buy-to-let covers a wide range of different forms of property finance, each of which can be utilised to quickly take advantage of an investment opportunity.
Connecting with lenders – do the homework
However, while there remain all sorts of funding options open to investors, it’s certainly true that the market today looks rather different than it did just a matter of weeks ago.
The fallout from the chaos at the top of the government has been that the rates and criteria employed by mortgage lenders has changed substantially, making it all the more important for investors to do their homework when considering their next step.
Technology can help investors do just that and there are platforms available which allow investors to connect directly with lenders.
The most successful property investors understand the benefit of securing the best possible funding, but also value the ability to move quickly when an opportunity presents itself.
While there are challenges ahead, there are also opportunities for investors brave enough to pursue them.
Miranda Khadr is founder of Provide Finance
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