Procurement · 10 July 2019

Improving your property investments

How to improve your property investments

Even among economic uncertainty and instability, property investments remain some of the most profitable and efficient ways in which to invest money.

However, as with other industries and areas, there are always ways in which to streamline and make processes and investments more efficient.

When it comes to property, assuming you are letting the property or properties to tenants for rental income, there is a great deal you may consider that – done properly – can help you maximise profits, make the investments operate more efficiently and even potentially help you expand and grow other exciting investments.

Options range from additional finance such as bridging finance, second mortgages and home improvement finance (read more) to investing in property-related technology, often referred to as ‘prop tech,’ to improve how your business runs and how you manage your portfolio from top to bottom.

Using property management software to improve business

An increasingly popular way in which to make your property portfolio work better for both owner and investor, as well as more smoothly and efficiently, is through property management software. This software allows landlords and property managers to carry out a range of functions and activities, which are usually costly and time consuming (source: Arthur Online), much easier than they otherwise would be:

  • Onboarding tenants
  • Onboarding service providers (such as tradespeople)
  • Managing rent payments
  • Managing deposits
  • Dealing with any tenant issues
  • Managing unpaid rent
  • Paying service providers and charges
  • Dealing with and signing legal paperwork

By utilising this type of software, much of the management process’ headache and stresses are removed, with the software taking care of everything under a single, more efficient platform.

How does finance help property investors?

There are no shortages of property finance options to help investors and portfolio landlords grow and portfolios. Some may wish to take out finance in order to purchase additional properties or land to expand the offering of their portfolio, whereas other investors may seek finance to improve properties in their existing portfolio.

Second mortgages

Second mortgages, also known as ‘second charge mortgages’ run alongside a traditional first charge mortgage. These specialist mortgages from specialist lenders need the approval of the first charge lender in order to be able to proceed. However, they can be used for a wide range of purposes including going towards the purchasing of properties as well as improving current properties if needed.

Second mortgages are only a viable option if you have acquired enough equity through the paying off of a reasonable portion of your existing first charge mortgage. There must also be enough equity leftover on top of this in order to satisfy the lenders and to offset some of the risk.

Second charge mortgages though, may be used by property investors where there is a property with a mortgage on it, but which has a great deal of ‘untapped’ equity. In such cases and particularly where the property with the existing mortgage is of a higher value, a second charge lender may be inclined to lend you what you need.

Renovation finance

Renovation finance is specifically designed for properties that are to undergo a degree of property improvement work, which ultimately will see the property in question’s value increase. This type of finance is often easier to acquire as it will not need to be for as much as other mortgages and secured finance. The Loan-to-Value (LTV) will therefore be lower and less equity required.

Finance for property improvements is often used for things like loft conversions, conservatory additions and ‘heavy’ refurbishments, such as converting a house into a house of multiple occupancy (HMO), to increase rental yields over the medium-to-long term.

Bridging loans 

Bridging finance is a commonly utilised way to literally ‘bridge the gap’ between property purchases. For example, as a property investor, you may be waiting for the sale of one of your properties which will in turn fund another property purchase. However, if the initial sale falls through, the property owner may find that they could miss out on the purchase they are chasing.

A bridging loan provides the finance needed to purchase the second property, whilst awaiting the sale of the first, which will go towards paying off the bridging loan. Once the sale of the initial property completes, the loan borrower uses the money from the sale to pay the bridging loan and then refinances (remortgages) their new property to pay off any outstanding amounts.

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ABOUT THE EXPERT

Daniel Tannenbaum is a co-founder at Tudor Lodge Consultants. He writes widely about business, technology and news.

High Streets Initiative