Property Investment Mistakes Made By Rookies

If you’re new to the property market, there are many things to look out for to reduce the risks involved. Check out our list of common property investment mistakes that you should be sure to consider:


The first mistake is not buying below market value

You’re in the business of locating motivated or desperate sellers who need to sell fast and at a low price, and you can assist them with their issues. Where pricing isn’t the most important factor.


Purchasing UMV will provide you with immediate equity as well as a safety net in the event that property values continue to decline. It also enables you to refinance and withdraw your initial deposit as soon as circumstances allow, substantially lowering the danger of losing money in the near term since you won’t have put any of your own money into the loan. There’s no risk on discoveries, and there’s no limit to how much money you may make.


You don’t need property prices to rise in value with this strategy (which works in any market) since you’re earning money right away from the discount and have a guaranteed profit.


Isn’t it lovely?


Mistake number two is underestimating the value of cash flow

It’s a formula for catastrophe if you don’t approach your property purchases like a business. We’ve all heard the cliché that cash flow is king, and that without it, your property company would collapse.


Now, we’re not just talking about having good cash flow properties, which is crucial, but also about having a buffer of mortgage payments and an extra for expenses to protect against interest rate hikes, which can eat into your monthly profits, or if a tenant leaves and you have to cover the void periods.


What if an unforeseen expense arises, such as the need to repair a boiler?


We understand that starting off may be difficult. Building a profitable property company without financial reserves, on the other hand, may be very challenging.


But it’s not all doom and gloom. If you don’t have any cash reserves, you may be able to locate a JV partner with funds sitting in the bank [earning no income] who would be willing to split an ownership stake in the property.


By using and reinvesting other people’s money [OPM], you may become very rich. Remember that the “number of properties you possess is vanity,” “cash flow is sanity,” and “cash in the bank is reality.”


Mistake #3: Purchasing for Capital Appreciation (Growth) rather than Yield

Many investors focus their whole business strategy on capital appreciation and underfund their property portfolio’s operating costs. This is a huge blunder and a high-risk approach that should be avoided at all costs.


Many people’s finances were destroyed as a result of this approach from 2001 until 2007. So this is an one of the most crucial property investment mistakes to avoid.


We purchase our shares on the assumption that property values would never increase, which means our strategy is focused on immediate profitability: revenue from rent rather than growth. This mindset enables us to make rational choices based on the fact that the numbers and the investment will generate a profit. Capital growth is seen as a benefit.


Sure, we all know that property values almost double every ten years, but if portfolios are purchased only for growth, deficits may quickly spiral out of hand.


Never, ever, buy due to an emotional attachment to a property. Remember that an asset is anything that gives you money, while a liability is something that takes money away from you. You should be turning down more offers than you purchase, ensuring a healthy return and accounting for all of your expenses.


Mistake #4: Not doing sufficient research

It is critical that you do sufficient research and due diligence before to making a purchase in order to limit and minimise the risk you are about to take.


The majority of inexperienced investors generate supply without demand. There’s no sense in purchasing a home you can’t rent out if your goal is to purchase and keep.


Your mining area’s local post code district must be well studied in terms of the rental market and the quantity of existing stock. The gap between supply and demand has to be bridged.


Buying just for the sake of a large discount is a bad idea, since you’ll be stuck paying the mortgage and all of the other costs that come with owning a home.


Purchasing a property with apparent discounts without first learning about comparables may lead to inflated estimates of true worth.


You should also do the following research along the way:

  • – Is it possible to get a mortgage on the property?
  • – Is there any damage to the structure?


Obtaining recent sales and letting demand confirmation from agents, checking both the Land Registry and current value prices, checking LHA rates, having a schedule of any refurbishment costs that will require works, a summary of the locality of the area, transportation links, demographics from government and council stats, crime rates, proximity to a school


Mistake #5: Not Having a Strategic Investment Plan

Investing in real estate is a personal approach depending on your financial position, risk tolerance, and the amount of money you have to invest, among other factors.


Preparing and understanding your personal motivation, goals, and objectives can aid you in taking the initial step and provide structure to your approach.


For example, if you only have £50,000 to begin with, investing in HMOs will be difficult since you will need more upfront cash, but it does not imply you cannot invest in single-let homes using our strategy of purchasing, renovating, and remortgaging your fees back out.


Purchasing a home is simple. It’s simple to accomplish, but it’s also simple to overlook.


Buying a home that will fulfil and deliver on your personal strategy and financial goals, on the other hand, is more of a science that you should get acquainted with.


Another factor to consider is how much time you can devote to your property company.


Many individuals have false expectations about how much time they can afford: they believe they have more or less time than they really have. If you are short on time, you may need assistance. If you have a lot of time on your hands, you may not need the same amount of seed/start-up money.


Mistake #6: Going Overkill on Refurbishment

If the property has to be renovated, do the absolute least. Don’t be fooled by magical makeover TV shows like Property Ladder or Homes Under The Hammer, where the selling price is greatly overstated and the project’s duration and expense are both drastically understated.


Always overestimate the expected selling price by 90%, which is an excellent figure to practise with.


Consider your profit and loss as well as your account to determine whether the endeavour is really worthwhile. Remember, that’s just an estimate; it may be more or less!


A Few Other Property Investment Mistakes

– Putting down a deposit of more than 10% on a home that hasn’t yet been constructed


— Purchasing on the open market without a solid compensation, termination, or return clause


– Having faith in all lawyers. Do your homework on them. We’ve heard of lawyers giving developers large amounts of money for apartments that didn’t exist.


— Check and double-check that a seller has the legal right to sell the property.


This is the ONLY way to know if the item you’re buying belongs to the person selling it to you.


Keep in mind these property investment mistakes, while some may seem obvious these are common issues that rookie investors face time after time. Contact F&M Finance and get expert funding & support on your next project.

Making Profit As A Property Developer

Property development, made famous by popular television shows, has become a popular career choice for many people. However, not everyone benefits from property growth. It is critical to finish your research and make educated decisions along the road before you become a profitable property developer.


Choosing between Buy-to-Let and Buy-to-Sell

As a property developer, you must select whether to put a property on the rental market or to build/renovate elsewhere and then sell it.


You may earn a monthly income from renters or a company if you invest in buy-to-let property. Furthermore, if you can put down a 25% down, buy-to-let mortgages are very simple to get. When pre-tax earnings are included, the overwhelming majority of English landlords make £15,000 per year. It is essential to remember, however, that as a landlord, you are still responsible for the property’s upkeep, including any repairs that may be necessary, and you must keep up with any inspections mandated by law.


You can employ a letting agency, but this will result in a loss of earnings. Tenant retention is a duty. You may also take the buy-to-sell route, which entails purchasing the property, doing any necessary repairs and improvements, and then reselling it for a profit. This is sometimes referred to as property flipping.


The greater the amount of labour required, the greater the danger and possible reward. This is dangerous since losses may occur as fast as profits. Property development is fraught with pitfalls. Everything from bad weather to a supplier delivering the wrong supplies may reduce earnings.


Before starting any initiatives, a property developer must create a comprehensive plan.


Choosing a Method of Operation

It is critical to determine how you will run your property development company before you begin as a property developer.


You may purchase property as a single trader or by forming a limited business. Choosing one is difficult, particularly because both have tax consequences. Operating as a limited company is advantageous since any interest costs may be covered by rental or property revenue.


Furthermore, corporate tax is the only tax you will have to pay, which is considerably lower than the tax on individually held assets. However, withdrawing revenue as a limited business may result in a higher tax bill. Individuals will pay less taxes in the long run.


Making a Purchase at the Lowest Possible Cost

To make a profit, you must sell for more than you paid for the development site.


The industry norm is that you get a minimum of a 30% return on investment. Emphasizing the significance of purchasing the property at the lowest possible price. Especially because the project is still continuing, the return on investment should include any refurbishment, buy, and resale costs.


A property developer might think about bidding at auction, negotiating with the seller, or purchasing a site with current planning permits. Auctions may be a wonderful way to get a good bargain, and you can frequently get access to properties that aren’t for sale on the open market.


Just be sure to complete your homework.


Property Developer


Potential Profit Calculation

Potential profit is estimated in the industry using three distinct metrics:


Gross Development Value Profit (GDV)


This number is the overall income you anticipate to earn on a project before deducting any expenses. It is expressed as a percentage and is also often used by real estate developers.


For instance, if you fully remodel two homes and sell them for half a million each, your gross development value is £1 million. If you produced £200,000 from the project, the GDV on the project would be 20% (£200,000/£1,000,000).


Isn’t it simple?


In the business, it is recommended that a property developer can earn a profit of 25% on GDV.


Unfortunately, it is recommended that you evaluate this project since, based on this evaluation, you will not be able to earn the necessary profit.


Profit on Investment

This measure compares profitability to overall development expenses. It is also stated as a percentage, comparable to GDV.


The calculation entails taking the gross profit and dividing it by the total development expenses. It is the same as GDV, except it includes all development expenses. Some developers use this measure to determine their goal return, but it is just a question of choice provided you have gathered the necessary data.


It is often used by planning agencies.


Return on Investment in Buy-to-Let

If you decide not to sell the home, estimating the return on investment becomes a bit more complicated.


You must first compute the entire yearly rent (annual mortgages minus yearly rent) and divide it by the purchase price. To convert this number to a percentage, multiply it by 100.


Choosing the Best Property

Location, Location, Location is more than just the title of one of the UK’s favourite property shows; it’s also an incredibly essential motto for any aspiring property developer.


Property purchasers who are well-informed and select the best locations will be able to get the most valued property. Furthermore, these properties will degrade at a far slower rate. Yes, the slogan is straightforward. However, it is necessary to have a more in-depth knowledge of what it implies.


As part of your study, figure out what the ceiling and floor prices are for the kind of home you’re searching for. Property prices are controlled by the government. The ceiling is the highest point, while the floor is the lowest.


What is the location’s centrality?

The cost of real estate is determined by where you choose to reside in a city or town.


Land is a scarce resource. Prices in highly established cities like as London, which do not have much room for development, are often higher than in places with more room for expansion. When a city’s population departs, the surrounding regions suffer the most from falling property values.


This link between property prices and location has a significant effect on supply and demand.



Finally, the parts of a city or town that appeal to you are a matter of personal preference. Nonetheless, there is a science to determining what constitutes a good area.


Access to transportation, general appearance, and facilities are all important considerations. The location in which you want to construct may have an effect on the size of the piece of land. To determine how much these features will contribute to the value of a home, attempt to imagine yourself as a prospective resident in the completed property.


They will almost certainly need to travel to work, and local transportation options will make this a lot simpler. Transportation connections are in high demand as real estate!


It is human nature for your hypothetical resident to desire to live in an appealing location with plenty of green space and high-quality landscaping, for example. The pace of market turnover is an excellent indicator of an area’s attractiveness.


A decent neighbourhood should also include a variety of necessary local facilities such as supermarkets, restaurants, and cafés. The majority of consumers choose to visit companies that are easily accessible and nearby. It is also essential to remember schools.


The proximity of a London top 10% primary school increases the value of a home by £38,000. In the rest of England, the number is £18,600.


Finally, many people want to feel secure in their neighbourhoods. Most individuals choose to live in areas with low crime rates and a welcoming environment.


Future Trends in the Field

A good property developer should look forward and evaluate what is planned for the region in the next years.


New school, hospital, and public transportation infrastructure plans may boost property values and make the region more appealing to potential inhabitants.


The Real Estate

Property developers must not be contemptuous of the property.


Properties that need the greatest renovation and maintenance are often the best investments. This is due to the fact that a property is a depreciating asset, while the value of the land will stay comparable to the property.


If you’re looking to raise finance for your next property development, speak to F&M Finance today and see what we can do for you and your project.

What does a development finance lender look for when funding a project?

Development finance is a kind of credit intended to assist property developers in financing projects such as new construction, renovations, and conversions. These loans may enable developers borrow enough money to pay up to 70% of the land and construction expenses.

Development finance could look something like this:


The developer has chosen to buy a piece of land on which to construct three semi-detached houses. The site is for sale for £250,000, with a construction cost of approximately £400,000. The bank has agreed to pay 70% of the land acquisition price as well as all construction expenses.


  • – £250,000 is the cost of purchasing the land.
  • – The estimated cost of construction is £400,000.
  • – £175,000 in development finance and £400,000 in construction funding
  • – £575,000 is the total loan amount.

In this case, the developer will just need to put £75,000 of their own money into the project.


The financing will allow the developer to complete the project or begin new ones.


These loans are only available from specialised lenders. Because of the present housing scarcity, getting your project financed is very simple at the time.


However, knowing what lenders look for when determining whether or not to fund a project is important if you are considering obtaining development finance. Every application is still thoroughly examined.


Amount of the loan

The loan amount is entirely up to the borrower’s choice, since development finance lenders may be willing to give anything from £1000,000 to £1 billion. Nonetheless, the entire loan amount is usually computed using the gross development value (GDV).


This number represents the estimated value of a property development after it is completed as a percentage. Lenders will compare how much you want to borrow to this amount. The bulk of lenders will only pay out up to 70% of the loan amount.


Term of the Loan

Depending on the size of the project, various lenders will provide varying timelines. Development finance, on the other hand, has periods ranging from a year to 36 months with no early repayment penalties.



Development finance lenders will look at your past property development expertise when processing your application. They’ll want to see proof of prior initiatives and, more crucially, know whether or not they were successful.


Lenders, understandably, do not want to take chances when dealing with big amounts of money. They want proof that you can effectively develop property, create profit, and, most crucially, earn enough money to repay the loan they provide you on time.


The Location of the Development

The lender will be interested in learning more about the location since, in real estate, location is everything, and the area in which the property is located will have a significant impact on the development’s worth once finished.


Furthermore, lenders are hesitant to finance several projects in the same region.


Requirements for Planning Permission

Lenders will want to know whether you have the required planning approval before they give you any money.


Development Finance

Plan of Exit

Lenders of development finance will want to know how you plan to repay the loan. It’s critical to plan ahead of time for how you’ll pay back the loan.


You may accomplish this in a number of ways:

  • – Individual houses or the whole complex may be sold.
  • – Rent out the finished home and choose a long-term financing package.


Project Feasibility Analysis

The lender will assess your project’s feasibility and inquire about any issues raised by the borrower. This is why it is critical that the property developer submits a thorough and well-thought-out application. You should be ready to answer any tough inquiries and provide answers to their problems.


Information and documentation required

Detailed information about the project site, including its location, value, and purchase price.


Evaluation of the Development

This is an assessment of the development’s financial risk.


A qualified valuer will evaluate how effectively your planned development project’s expenses will be fulfilled. In addition, these papers will detail how the proposed project would affect the surrounding environment and community.


Councils will also use the assessment to assess the property development’s economic feasibility.


Costs of Development are broken out in detail.

The significance of providing a comprehensive cost overview cannot be overstated. The lender may accept the number at first sight, but if they dig further, it’s critical to give sufficient details.


Any predicted numbers are meaningless if they are based on incorrect data. Lenders will be unable to set up a drawdown plan for you without this information.


Planning Permission Specifications

Giving the lender information about any planning permit you have will help them comprehend the project completely.


What kind of structure has been authorised by the authorities, and what precisely do you want to construct?


It may be beneficial to go over planning papers as well as any drawings. This data will also aid them in determining if the projected costings are correct. Having all of the necessary planning permissions in place will significantly assist the application.


Any planning limitations, if any, as well as any community infrastructure contributions, should be included.


Information about the Applicant

Lenders will ask for specific information about your previous projects in order to verify your previous property development expertise.


This will most likely include a CV and a list of previous work. They should contain information regarding the project’s success. Is it true that they made a profit? The lender will also want to know about the development expenses and the price at which they were sold. The lender will gain trust in your capacity to manage your planned project if you provide this information right away.


If lenders are certain that the project is not a danger, they will keep expenses low. The lender will want to examine the project managers and primary contractor’s information if the borrower is just starting out as a property developer and doesn’t have any prior expertise.


Timeline for Development

To get a better understanding of the project, the lender will want to see a comprehensive schedule of the work that will take place throughout the course of the project.


They will be able to create a suitable payment plan by bringing all of this information together with costings.


Team Information

The people you choose to work on your property development project will determine how eager a lender is to provide you a loan.


Lenders will avoid working with anybody who does not have a proven track record. They will also be hesitant to deal with someone who is inexperienced.


Lenders, on the other hand, will be eager to finance the project if you collaborate with renowned and experienced individuals.


Assets, Liabilities, Income, and Expenditure Summary

Lenders will examine at an asset, liabilities, income, and spending summary before accepting your application (ALIE). This document should be completed as soon as feasible.


The lender will want to see one to verify that if your income dropped or even ceased throughout the project, you would still be able to sustain yourself financially and cope with any delays or expenses that arose.


This will also help them assess your ability to back up a personal guarantee. Identification, proof of residency, and a refundable deposit are all required.


To show you are not involved in money laundering, you will need to confirm your identity, residency, and capacity to make a deposit. It is recommended that you provide this information right immediately.


Getting Approved For Development Financing

It’s critical to make sure your development financing application stands out and has a good chance of being approved. This may be accomplished in a variety of ways, including:


Being Accurate

You should make sure that all of the information you include in the application is clear, accurate, and well-organized.


This will aid in the application’s appearance of professionalism and thoroughness.


Numbers should not be exaggerated

Inflating the projected value of a finished project is never a good idea.


Lenders aren’t dumb, and they’ll be able to detect if you’ve done anything like this. If they think anything is amiss, they are unlikely to trust the rest of your application and will most likely reject it.


Completely comprehend the numbers

It’s critical that you comprehend all of the figures in the paper, including the minor totals.


You’ll need to mention the phases of the project as well as when you’ll require the money. Lenders want to make sure you fully comprehend the project’s financial requirements.


Don’t exaggerate your experience.

Lenders will check into statements about previous property projects you’ve worked on; don’t fall into the trap of fabricating information to seem as if you have more expertise than you do. If you’re just getting started, explain that being honest is crucial.


F&M Finance have access to some of the best lenders across the United Kingdom. If you need funding for your next development project get in touch and see what we can do for you.

Property Investment: How To Reduce Risk

The majority of us are drawn to the ‘new’, in this case property investment. Being at the dreamlike stage is exciting. There are so many possibilities. We receive the fresh start we’ve been hoping for. Isn’t it true that if we turn our backs on the old thing, all of its issues would suddenly vanish?


Take a look at how lush the grass is over there. But how long is it going to last? Is it really all we’re looking for? The foolish fantasy is that doing anything else, with someone else, will be easier and better.


There’s no reason to believe it won’t be better, so let your imagination go wild. You are misled into believing that if you restart, all of your problems would vanish.


Is anything new, however, truly better? Or are you just different? Well, that is debatable. If you try to avoid the fight, the new appealing object will present you with the same difficulty until you master it. As if it were a clock.


Like the lover who attracts the same type of partner who hurts them over and over again, or the individual who loses money in every new attempt. When you try something new, the risks are equivalent to the benefits:


  • – Do you believe you’ve gotten rid of all your problems? No, you simply receive new ones or old ones in a different form.
  • – Do you believe the disadvantage was dealing with tough customers? Now you don’t have any.
  • – If you thought the drawback was a lack of employees, think again. Now you have to do everything yourself.
  • – Do you believe the disadvantage was that you received criticism? You don’t have any admirers now, do you?


There is only one way to make the struggle go away if you want it to. You must learn from it, develop from it, persevere through it, and master it.


Then you believe you’ll be able to relax on a beach while sipping cocktails? Ha! All this does is prepare you for the next level challenge, which you were not prepared for previously.


But what if you’re doing something you know you don’t enjoy?


Before you get into something new, especially if you’ve been doing your old job for a long time and have a track record, make sure you check the following:


  • – Is it possible that I’m being weak and fleeing?
  • – Am I oblivious to the new thing’s drawbacks?
  • – Is there a pattern to all the old-but-once-new things I’ve started?
  • – Is this a test to see how far you can go?
  • – Is it possible that I’m being tempted by someone or something else?
  • – What am I supposed to do if I have to start all over again?


Only take on new challenges if they are in line with your vision and principles. Only try something new if you’re fully aware of the drawbacks and willing to put up with them.


Then, if you’re clear and certain, go for it, despite the short-term drawbacks such as a lack of income, security, and fear, and stick on that route for as long as you can, since there will be future stumbling blocks where the lure of the new and the romanticism of the easy will seduce you.


When you ask people how hazardous it is to get into property investment, they may give you different answers depending on when you ask. You wouldn’t have encountered many people in the years leading up to the 2008 financial crisis who thought property investment too hazardous. However, with housing prices at an all-time high, there are far more sceptics than there used to be about the rationality of property investing.


While there is no such thing as a “no risk” strategy, there are those that place more in the hands of chance than others. So lets look at how to reduce risk in property investment.


1. Go for the long haul.

Whatever properties you buy and sell during the course of your property investment career, you will be largely at the mercy of the market and factors such as interest rates. At work, there are many variables that fluctuate, but the overall trend has been, is, and will almost always go upward.


House prices were much lower 20 years ago than they are now, and the chances of values being lower in 20 years are limited to none. If you buy wisely, don’t overextend yourself financially, and are willing to stick it out through the tough times, you will eventually enjoy the benefits.


How To Reduce Risk In Property Investment


2. Don’t overpay because you’re in a hurry.

When you first start out on your path to making money through property investment, it’s all too tempting to rush into things and overpay. Every pound you spend on a purchase is a pound you’ll have to recuperate later, so it’s critical that you thoroughly investigate the area and, more significantly, what makes a reasonable price before bidding on houses.


This knowledge puts you in a powerful negotiating position, and it might literally save you thousands of dollars. Research will also pay off for buy-to-let investors, as a little investigation will provide you with a wealth of information about rental demand and aspects such as the average time it takes to find tenants in the area. Check out our top tips for arranging property finance.


3. Protect yourself against squatters.

If you ask an average buy-to-let investor what keeps them awake at night, they’ll tell you it’s figuring out what to do if their renter stops paying rent and/or trashes the property.


All of this anxiety can be alleviated by arranging buy-to-let insurance with one of the main insurers. Letting agents frequently provide this function as part of their overall service, for which you will be charged separately.


When a renter stops paying, a standard insurance will kick in until the problem is resolved. Because coverage varies, you should read the fine print to see what each policy covers.


4. Thoroughly vet your tenants

There’s only one thing more difficult than finding tenants for your rental property: getting bad tenants out. A critical component of any buy to let investing plan is ensuring that your tenants are required to give genuine references, which are then confirmed.


It’s also a good idea to show potential renters around if you have the time, as meeting the individuals who will be living in your home will tell you a lot about them. When combined with a thorough vetting process, the chances of you hiring a problematic renter are greatly reduced.


5. Take rate hikes into account when planning your budget.

With the Bank of England’s base rate currently sitting at just 0.5 percent, there is far more room for it to rise than for it to fall. This is in sharp contrast to the worst of the 1980s, when rates were approaching 15%, and anyone who lived through that period will know that even a minor shift in the rate may have a significant impact on how much you have to pay back on your mortgage.


The simplest method to avoid financial trouble is to consider this into your budgeting before making a purchase. If you max out your credit and the rate rises, you’ll end up paying more than you’re getting in rent or with a mortgage you can’t afford. Both of these scenarios are undesirable, so make sure you leave enough wiggle room to adjust for rate swings or choose a long-term fixed-rate mortgage.


In conclusion

It’s upsetting when a property investment goes wrong owing to circumstances beyond your control, but you’ll kick yourself if it happens due to a lack of planning. To some, thinking about how you can reduce this risk before you start may sound too cautious, but to those who find themselves on the wrong end of the equation, it will appear to be a perfectly reasonable and wise thing to do.


If you prepare properly, you can eliminate a lot of the risk from the procedure, so be sure you do your part or you might regret it later.

Top Tips For Arranging Property Finance

It’s critical to get the best property finance possible for your real estate investments. There are a lot of mortgage products out there, and picking the one that is right for you isn’t easy. Each of the hundreds of lenders will have its own pricing and qualifying requirements, which can change at any time based on market conditions. If you’re still wondering why should I invest in property? Then check out our last blog.


Even if you’re a seasoned real estate investor, finding the best property finance for your next project isn’t straightforward. We’ve put together a list of things to think about to help you narrow down your options and get the best financial arrangement.


How many mortgages do you currently have?


The number of mortgages you currently have will always be of interest to a lender. If you already have more than three buy-to-let mortgages, some lenders will refuse to give you another one.


Other lenders will set a limit on the number of active buy-to-let mortgages you can have. This could range from five to ten buy-to-let mortgages. If you own a number of buy-to-let homes, you can have more than ten buy-to-let mortgages. In this situation, you can still get a mortgage from a specialised lender.


Total of your mortgage debt


If you have a portfolio of homes, any potential lender would almost certainly want to examine your total mortgage balance. Some lenders will set a restriction on the amount of money they are willing to lend you against this.


Furthermore, some lenders have a maximum amount that they will lend to any individual property owner or limited company. This is true throughout your entire portfolio. The bottom line is that if you already have a mortgage with a particular lender, they may be hesitant to lend you extra money.


Property Finance


Your Earnings


Several lenders will want to know about your additional sources of income than rental revenue. They often have a minimum income criterion of roughly £15,000. Some lenders have a higher income requirement.


Your Portfolio’s LTV


A potential investor will almost certainly want to know the average LTV for your entire portfolio because it gives them a clear sense of current and future risk. If your average portfolio LTV is low, potential lenders will be more responsive. If this is the case, you will almost certainly get the greatest rates.


Portfolio and Property Interest Cover Ratio (ICR)


If you’re not familiar with the interest cover ratio (ICR), it’s a stress test that most lenders use to compare different interest rates. A potential lender will want to make sure that the rental income you receive from the property is sufficient to support mortgage repayments should interest rates fluctuate on a property-by-property basis.


When you have a portfolio of buy-to-let properties, most potential lenders will do ICR stress tests on your entire property. When it comes to stress tests for ICR, each lender has its own set of requirements.


So keep these factors in mind when you plan your next property finance transaction. Before approaching lenders, make sure you have all of the necessary information. This will make your life easier.

Why Should I Invest In Property?

The question we get asked most. Why should I  invest in real estate? Look at the world’s wealthiest people and you will realise something: the wealthiest people, no matter where they are on the planet, have either made their money from property or have invested their money in property. Their triumph has left a trail.


Why do they invest in real estate? One of the primary reasons is that it is a secure place to invest their funds. Many of them have made their fortunes through real estate, or by investing in real estate in the first place.


In this blog we’ll go through five reasons why we believe now is the best moment for you to invest in real estate, and why property is one of the safest investment vehicles available.


The first reason is population growth

The population, or population increase, is reason number one if you’re investing in the UK housing market.


We have some information here. Apart from the fact that we reside on a little island that isn’t getting any bigger, no new land is being built. The size of the island is what it is. However, the statistics shows that the UK population has risen by an unprecedented 8%. In just the last decade, the population has risen by 6 million people. As a result, the current population is little over 66 million people. On a little island, there are 66 million people. Every day, that number becomes more and larger. But there isn’t any more room. As a result, there is a severe housing scarcity.


In the next 20 years, there will be 28 million different households in the United Kingdom. We aren’t constructing dwellings quickly enough. Every year, this equates to an increase of roughly 250,000 households. An rise of 250,000 people per year! And we aren’t even close to meeting that demand for housing. So that’s the supply and demand situation right now. Supply is insufficient to meet demand, resulting in a need for housing, as well as a need for rental housing, and driving up house and rental costs.


With 402 people per square kilometre, the UK is now even more populous than any other European Union or G8 countries. That’s an incredible number of people packed into a square kilometre.


Housing is a critical requirement. Houses are necessary for people to live in. There will never be a scarcity of housing in the United States. However, the real houses themselves are in low supply, which is driving up costs. We aren’t producing enough supply. But the scariest part is that we don’t appear to have a plan in place to build enough supplies.


Should I Invest In Property?


The second reason is that you will have immediate equity

When it comes to real estate, you can make money the day you purchase it. You can get a home for a lower price than the market worth. Let’s imagine you have a £100,000 residence that you know is worth £100,000. In the same area, a house in similar condition sold for £100,000. You’ve done your homework. You’ve looked at Rightmove, Nethouseprices, and all of the other comparable sites. You’ve looked at the most recent sales. You’ve looked at what’s currently available. And you’ve discovered this mansion, which is worth £100,000. However, it is currently available for £80,000. You’re putting down a deposit of £20,000 right away. You’ve made a 20-thousand-dollar profit today. If you sold that house for £100,000 in three months, you would make a £20,000 profit.


You may either add immediate equity to a property or add value to improve the equity in a short period of time, literally weeks. There is no other asset class that can do it in the same way as property does.


Reason number 3.. It’s all about the timing

Many people say that they are waiting for the ideal time to buy property. I’m going to wait till after Brexit. I’m going to wait till the government changes. They said back in 2000 that we should wait until after the millennium bug to see whether it occurred. Then came the crash in 2007, and they decided not to buy because there had been a crash. Then they most likely began to climb, and we heard the same folks complain, “The housing market is rising today, and I can’t buy.” It’s on the rise. I’ll have to wait until things settles down.


It’s nothing more than a list of reasons why you shouldn’t start. Here’s what you should do: you should buy right now. It makes no difference whether we are in or out of the EU. It makes no difference if laws change. Laws are constantly changing. It makes no difference whether there is a recession or a rise. What matters is that you purchase property now and profit from it. You get the property at a good price. You aren’t purchasing with the expectation of a future increase in value. That is a form of gambling. You could just go to the casino and bet your entire bankroll on red or black. You’re buying with the right information and awareness of what a good property is: one that generates you money, one that you can add value to, one that you can acquire below market value, secure, and build in value afterwards.


It’s all about ensuring that you have enough cash on hand. So, don’t buy a house just because it’s below market value and won’t make you any money. You must purchase for cash flow. Every month, a property should provide income for you. What was the point of buying if that wasn’t the case?


They’ll be higher in 10 years than they are now, and they’ll be higher again in 20 years, and again in 50 years. So, get started in real estate now. Stop putting things off. Stop waiting for the perfect moment to strike. It’s now or never. The moment has always been right.


The fourth reason is Brexit/Covid-19

Obviously, we couldn’t make such a list without naming these two. They’re also all over the news right now.


Recent headlines haven’t been easy to read, with a lot of conjecture about housing prices taking centre stage. The property market in the United Kingdom has proven to be quite durable, having weathered numerous recessions and depressions over the years, and we see no reason why this crisis will be any different.


House prices have risen in recent months, with activity in the UK property market continuing to rise. While the many house price indices often provide disparate findings, the data all portray a similar picture of how robust the market is right now.


On track to be one of the busiest years ever


Property is still in high demand among buyers and investors across the United Kingdom. The real estate market is on track to enjoy its most active year since the financial crisis. According to Zoopla’s latest House Price Index, 2021 is expected to be one of the top ten busiest years since 1959.


This year, over 1.5 million homes are expected to be sold, the biggest number in 14 years. This is a massive 45 percent increase over 2020. The search for room, as well as the stamp duty holiday, are driving this rapid expansion.


Pensions are reason number five

Over the last few years, an increasing number of people have realised that their pension is not worth what they thought it was or what they anticipated it would be. There are some nice pensions out there, but the vast majority are not. It will be determined by your location, your work, and the amount you are paying in.


However, in the grand scheme of things, most people do not have enough money from their pension to pay their living expenses when they retire. Their living costs that they’ve become accustomed to in the workplace, when they leave that employment and begin to rely on their pension, their income drops by roughly 70%, a massive, massive drop in terms of the money that they’re bringing in every month. There is a pension deficit. The average retirement age is increasing all the time. People born today will be in their late 70s or early 80s when they retire. Our grandchildren are even older. Because of the pension gap, retirement age is creeping closer and closer.


Just one buy-to-let property, just one investment property purchased in the right way to grow equity and cashflow, and just one property can supplement your retirement income. There’s only one! Imagine having ten buy-to-let properties, each one providing you with a monthly income.


You’ve got cashflow from those properties, but you’ve also got something you can pass down to your children, who can pass it down to their children’s children and so on.


If you’re still questioning whether or not now is the right time to invest, you can call us today for a free no obligation chat and get some advice from F&M Finance experts.

Buy-to-Let Mortgages: How to Raise Finance

Obtaining a buy-to-let mortgage or financing capital for property investment is a dynamic process. Things have changed so drastically in the past several years that it has seemed like a roller coaster, and the rate of change shows no signs of slowing down in the next years.


Your Credit Score

The importance of having a clean credit file cannot be overstated. If the applicant has bad credit, lenders have less flexibility in approving a buy-to-let mortgage than they would in approving a home loan.


Some minor previous concerns, such as a missing credit card or store card payment, may not be a concern, but defaults, County Court Judgments (CCJs), and missing mortgage payments may.


It’s also a good idea to stay away from payday loans. Lenders dislike this kind of financing since it implies that the customer isn’t managing their money wisely or has a little reserve of cash accessible in the event of a worst-case situation.


If you want to build a property portfolio using mortgages or other types of lent funding, be sure your credit file is in order.


2 Points on Buy-to-Let Mortgage Eligiblity

Minimum Wage

A minimum income of £25k will be necessary to be able to pick from the majority of BTL lenders. There are lenders that will deal with people on a smaller income, and others have no minimum income criteria at all, but a £25k income will guarantee you have access to the bulk of the market.


How Many Properties You Already Own

The amount of mortgaged buy-to-let properties you possess may influence which lenders are willing to lend to you. Some lenders, for example, may reject an application from a landlord who already has 10 buy-to-let mortgages.


Because this amount varies from lender to lender, the best thing to do is get assistance from a seasoned mortgage broker.


buy-to-let mortgage


What is the maximum amount of money you can borrow?

The amount you may borrow with a buy-to-let mortgage is determined by the rental return. In other words, the amount you may borrow is determined by how much the lender believes you will make.


How do lenders figure out what the rental income will be?

So, as a borrower, do you need to demonstrate what your rental return is expected to be based on market comparisons? Will the lender do their own market research to estimate the probable or customary rent?


The following is how it works:


In most situations, lenders calculate the monthly payment by multiplying the amount borrowed at a preset rate of interest (5 percent in most circumstances, independent of the real interest rate of the product) by 125 percent (in most circumstances), and the rent must be more than that number.


Example of a Calculation
With a £75,000 loan with 5% interest, the monthly payment is £312.50. This is then multiplied by 125 percent to get £391. In this case, the monthly rent would have to be at least £391 to qualify for a loan of $75,000. The lender would have to be convinced that such a loan could be as near to guaranteed as feasible.


Insurance for Renters’ Protection

Buy-to-let building insurance is required to qualify for a BTL mortgage. Normally, this will be the only kind of insurance that you will need.

So, though rental protection insurance isn’t required, it’s a good idea to have it.


Mortgages with no monthly payments (Interest Only)

All buy-to-let lenders offer interest-only mortgages, which are quite popular.


Buy-to-Let Advice for Everyone

You should always retain a feeling of distance from any possible buy-to-let property as an investment. You aren’t purchasing it to live in; rather, you are purchasing it as an investment. However, it is both a cash-flow business and an asset.


The difference between the purchase price and the rent you can get is crucial, and it’s what buy-to-let mortgage lenders are looking for.


For example, instead of spending £140k on one semi-detached property that would only rent for £650 per month, it could be preferable to invest £70k on two terraced houses that would rent for £550 per month each.


You must carefully control your spending if the home requires renovations. Keep it as basic as possible, and avoid expressing your particular interests in the décor. All that is required are Magnolia walls and a functional kitchen and bathroom.


An investor must also think about the sector in which they want to invest – perform your study and due diligence. Get to know the local market as well as you possibly can. Consider the following points:


  • – What is the rental yield potential?
  • – What is the relationship between the yield and the buying price?
  • – Is there a steady demand for rentals in the area?
  • – Is there room for capital appreciation?


Before making any choice regarding a property, you must thoroughly research the region, analysing historical data such as sales, typical rentals, market improvement, and price increases.


That way, you’ll be able to tell whether your objectives are realistic.



The main message here is that buy-to-let mortgage lenders prefer to deal with candidates who have an excellent credit history and are looking for a secure investment with high returns.


So, if you want to get started investing in real estate, keep it basic and you won’t go far wrong.

Bridging Loans: 5 Things You Need To Know

Over the previous five years, the number of bridging lenders has expanded significantly, making Bridging Loans up to £2 million more accessible and elevating bridging financing from a last option to a must-have instrument in your development arsenal.


However, if you require a substantial Bridging Loan exceeding £2 million to fund transitory assets or release equity from a house, your alternatives narrow drastically, and you’ll almost certainly need to explore outside of the major lenders.


We’ve compiled a list of five things you should know before diving into the big world of large Bridging Loans.


1. The use of large bridging loans is becoming more prevalent.

It is feasible to acquire jumbo loans if you have the necessary connections and experience to negotiate customised solutions. For an international property investor, we recently acquired a £25 million bridging loan. He intended to borrow £28.5 million to buy a new home and use his present home, worth £19.1 million, as a co-signer on the loan. Borrowing against two “trophy” houses resulted in a narrow pool of interested lenders, but we overcame a slew of obstacles and closed in four weeks, allowing the client to move into their new home.


2. They aren’t as pricey as you may believe.

Even among seasoned property developers, there is a widespread belief that bridging loans, particularly large ones, are too costly. However, as the industry grows in popularity, there are more lenders to choose from, which leads to better pricing. Furthermore, if obtaining a substantial Bridging Loan allows you to purchase the property that is perfect for your portfolio at the correct price and in a timely manner, you will save money in the long run.


bridging loans


3. It’s all about who you know.

You should go outside the traditional banks to specialised lenders for substantial bridging loans. The bigger the loan, the fewer lenders you’ll have to choose from, so do your homework and shop around for the best options. Because they may be difficult to come by, contacts are more important than ever when it comes to large bridging loans. Using a broker may help you not only search the whole market, but also connect you with people who are ready and competent to deal with unusual development scenarios.


4. They’re a fantastic way to get into development.

Large bridging loans may turn development sites that were once deemed to be impossible into a reality. With a stub-lease and allowed development rights, we assisted a client wanting to acquire a retail unit and offices. He intended to lease the property for two years before turning it to residential or redeveloping the whole property. The lender needed more confidence about the expected construction costs and GDV. We were able to get a substantial Bridging Loan of £8.4 million at 70% LTV by working closely with all stakeholders, and the lender agreed to paying 100% of the planned construct costs, subject to QS reports and valuations.


5. Bridging loans are a kind of development exit finance.

Development Exit Finance is a short-term loan used to discharge remaining debt owed on a property development project after it has been completed. It’s an excellent tool to have on hand if your current financing is coming to an end and your sales aren’t going to be finished on time. Reduced risk means it costs less than Development Finance, buys time and eliminates the need to slash prices for rapid sales, and frees up equity to finance your next project, making it a win-win situation.


If you’re considering a bridging loan and are looking for advice, contact us for a no obligation chat.