Funding Options When Buying an Investment Property for Sale UK
March 15, 2017
When buying an investment property for sale UK, one of the first questions that pop in every investor’s head would be regarding funds. How am I going to finance this acquisition?
It’s a rather logical and practical query if you ask us. After all, accumulating enough cash to completely purchase any property often takes time both because it’s a rather huge sum and because pooling and/or arranging it requires it.
Knowing one’s options is just as crucial as choosing which medium to use. This is why we came up with a list of the most common and effective financing alternatives that can help you purchase that much coveted investment property for sale.
Choice #1: Bank Loans – As its name suggests, these are borrowings made to a bank to be repaid with interest on or before a fixed date in lump sum or in equal intervals. It is a long term credit that’s often massive in value which is why it often takes time to process and demands a strict number of requirements prior to approval and cash release.
Choice #2: Mortgage – Also known as asset-based lending, this is a loan secured by collateral which can include both corporate and personal assets. In other words, inability to repay the debt will constitute to a foreclosure of one’s assets. Like bank loans, the principal will have to be paid with interest often for five or more years until the entire credit is completed.
Choice #3: Receivables Finance – Particularly directed at businesses, this makes use of sales invoices o trade receivables to raise the needed financing. Here, the value of the invoice/s are advanced even before they mature or in other words prior to payment collection from one’s owing customer/s. The beauty of it is that it’s not a liability but rather an asset transaction and it can be arranged in as fast as 24 hours. However, the total cash pooled through receivables finance will ultimately depend on the invoices. This is why this option is mostly used to fund pre-purchase and post-acquisition costs instead of the investment property for sale’s price tag.
Choice #4: Bridging Loans – For immediate and short term liquidity needs in buying an investment property for sale, a bridge is your best bet. A type of short term interim finance, it is taken out while one’s bigger and permanent financing is still being processed, arranged or is yet to be available at a later date.