Some confusion exists as to what a buy to let commercial mortgage actually is. Some brokers and lenders used to regard residential buy to let mortgages as commercial propositions, leading to a mindset that all buy to let mortgages were commercial in their nature.
With more property investors eager to include commercial property in their portfolio commercial lenders were forced to create mortgage products specially crafted for the commercial property investor. Taking a look at the whole market the main types of buy to let commercial mortgage products can be defined under the headings “the good”, “the not-bad” and “the ugly”.
The highest quality of investment property would have very good quality tenants on a long lease and occupy the best location. Because of the stability of the tenant these properties become very attractive to the institutional investors, resulting in slightly inflated values. These higher values can put pressure on the buy to let commercial mortgage by reducing yields.
These investments would similar to blue chips, with the likely exception of the quality of the tenant. Instead of a well established business, such as a national chain or franchise, the tenant may be a smaller concern. Because the values of these properties are more realistic they can offer more attractive rental yields, resulting in more interest from smaller investors.
The two types of propositions described above are the ones most likely to be funded by banks or building societies. These high quality buy to let commercial mortgages will obviously attract the most impressive rates and flexible terms.
Well, OK, ugly is probably a bit harsh. These are the self-cert type of investments. The property may be purchased speculatively or in need of upgrading before being returned to the rental market.
Investors in this market have historically struggled to find a buy to let commercial mortgage at sensible rates, however specialist commercial lenders have entered the marketplace, meaning that there are more opportunities to be seized.
Buy to let commercial mortgages present an great opportunity to take advantage of the rich vein of commercial investment properties available at the moment. You must look carefully at all the criteria which go to make it a good investment and get some professional guidance to find the best mortgage arrangement.