Commercial Investment Mortgages
Grow your business with finance for real-estate investments.
A commercial investment mortgage is designed for companies or individuals to purchase or refinance a commercial, mixed use or semi commercial property in order to rent it out for profit.
The borrower normally has no link to the occupier(s) of the building, unless they have what we call an “Opco Propco” structure where the owner of the commercial property and the tenant are separate entities, but both owned by a connected party or individual.
Benefits of Commercial Investment Mortgages
What can I use Commercial Investment Mortgages for?
Commercial investment mortgages give commercial property investors access to finance to secure commercial property over a longer period of time. Loans can be secured against almost any commercial property, including:
Industrial Buildings
Warehouses, factories, industrial parks and single units
Office Buildings
Single offices, office blocks and serviced offices
Retail Premises
Shops, semi commercial units (flats above), shopping centres, parades and retail parks
Leisure Premises
Pubs, restaurants, cafes, hotels, B&Bs, holiday complexes, and guest houses
Health Premises
Dental practices, care homes, surgeries, vets, and opticians
Education Premises
Schools, colleges and nurseries and Student Accommodation
Key Considerations
Lease Length
Generally, lenders prefer a lease with terms of 3-10 years remaining as a minimum. The lease determines how long the tenants must stay in situ which secures the rental income for the term of the lease. It also confirms any anticipated increases in rent over the lease term. Additionally, if the lease has a break clause it should not be solely in favour of the tenant alone.
Rental Yield
Although lenders will have maximum loan to value limits that they are willing to lend against, it is often the rental income that is the most important consideration determining how much you will be able to borrow and whether a loan is affordable. The lender generally expect the rental income to be at least 125%-145% of the monthly repayments on your mortgage each month for the loan to be granted. This is called the interest coverage ratio (ICR)
Tenant Quality
The more financially robust and reputable the tenant is, the better it is for the financing terms of the loan. A tenant who is at risk of financial distress will not be considered a reliable source of rental income. Likewise, it will be viewed by the lender to be riskier to have just a sole tenant because failure to pay has a more significant impact than it would with multiple tenants.
If you are looking to grow your business by investing in commercial property, then get in touch with us today to see how we can help you find the right solution
