| In the not so distant past the term "buy to | | | | investor. The lender will ask can the |
| let commercial mortgage" would have been | | | | borrowing costs still be paid in the event of |
| synonymous with "residential commercial | | | | the tenant defaulting? this is particularly |
| mortgage". This is because many lenders and | | | | important and the valuer may well be asked to |
| brokers regarded buy to let mortgages as | | | | comment on the likelihood or otherwise of |
| commercial propositions. | | | | finding good tenants quickly and easily. Due |
| | | | to this potential for risk, a lender will |
| Many property investors now consider a good | | | | also be interested in verifying the stability |
| mix of residential and commercial property to | | | | and reliability of the tenant(s). |
| be a requirement of a well managed portfolio. | | | | |
| This change in demand has forced the market | | | | Not surprisingly, speculative investments are |
| to adapt, buy to let commercial mortgages are | | | | the hardest to fund. Very often the property |
| now one of the fastest areas of commercial | | | | is not pre-let, may be in need of repair or |
| lending. | | | | refurbishment and may not even be in a good |
| | | | location. For these reasons a lender will |
| When considering the range of commercial | | | | expect the borrower to have the means to |
| investment property, the main types of buy to | | | | support the buy to let commercial mortgage |
| let commercial mortgage products can be | | | | from Day One - and evidence of this will |
| defined generally under the headings 'blue | | | | usually be required. |
| chip', 'premium', 'secondary' and | | | | |
| 'speculative'. | | | | High street banks and building societies are |
| | | | most likely to favor the blue chip or premium |
| The highest quality of investment property | | | | propositions, They usually reward solid |
| would be the "blue chip" investment. These | | | | investment opportunities will very low |
| properties will have very good quality | | | | interest rates and terms. |
| tenants on a long lease, as well as occupying | | | | |
| the best location. Because of the stability | | | | Commercial buy to let investors seeking |
| of the tenant these properties become very | | | | funding for the secondary type of properties |
| attractive to the institutional investors, | | | | have historically struggled to find funding |
| resulting in slightly inflated values. These | | | | at sensible rates, the challenge was being |
| higher values can put pressure on the buy to | | | | able offset the renal income against the |
| let commercial mortgage by reducing yields. | | | | higher interest rates from the banks. |
| | | | Competition in this sector is bringing rates |
| Premium investments would typically be very | | | | down though. |
| similar to blue chips, with perhaps the | | | | |
| exception of the quality of the tenant. | | | | Speculative investments continue to be a |
| Instead of a well established business, such | | | | specialist area, and unsurprisingly there are |
| as a national chain or franchise, the tenant | | | | still few lenders prepared to back these |
| would still expected to be of high standing. | | | | deals unless they are confident of the |
| Because the values of these properties are | | | | borrowers ability. |
| more realistic they can offer more attractive | | | | |
| rental yields, resulting in more interest | | | | Buy to let commercial mortgages are helping a |
| from smaller investors. | | | | new breed of property entrepreneur seize |
| | | | opportunities. Obviously caution still needs |
| When examining 'Premium' buy to let | | | | to be exercised when assessing the |
| commercial mortgages lenders will question | | | | profitability of any commercial property |
| the experience and financial standing of the | | | | investment. |