Good Mortgage Advice When Buying Commercial Property Is Essential
Whether you are buying a property as a home or as an investment, the advice is the same, always get the best financial advice you can.
Remember, the "free" advice you get from your local bank isn't free! They want you to buy from them, so while they may spin it so it sounds great, it's always worth paying for the advice of an independent mortgage broker.
Buying property when the market is low, when interest rates are low, or when the Government is offering some kind of incentive would be ideal - but not always the case. If you've got the funds now, and any of those scenarios are around, you've already got some bargaining power. Remember though, interest rates and Government incentives won;t last, so budget for the long term future as much as the present. That's why it's essential to get solid advice at the off. Knowing you've got the best deal for the long term will not only help you sleep at night, but keep your profits growing.
Buying property can be stressful till you get used to it. Most people only buy a property a few times during their lives. You're perhaps looking to buy a few times a year. So, you have to be 100% certain that all your finances are in place, and are secure. Be sure to factor in rent increases in any leasing agreement to cover any expected changes in your finances.
There are too many stories of property investors losing their portfolios as interest rates rise, or unemployment rises. If your loans have to be refinanced after a set period of time, it might be wise to build a savings pot to cover unexpected shortfalls. If you unexpectedly lose your tenants at the same time as you have to refinance, you need the money to cover yourself for that time.
Speak to the right people! Don't go to speak to the same mortgage broker that helped you when you bought your home. Find out all the specialist commercial mortgage advisors in your area and interview them. Get as much independent advice as you can, it will pay you back. When you see them, be ready with lists of questions about different scenarios, loss of tenants, interest rates, etc etc. It's worth planning for the worst, then at least you're prepared to weather the storm.
Never be afraid to ask questions and for advice. You don't know it all, and it's fine to admit that you have gaps in your knowledge. Better to discover today what you don't know so you can cover yourself, rather than in a few years time when it's too late and you've lost your shirt. Always be ready to listen and learn. You'll find over time that you amass a team of experts in different fields that you can call on for advice - that may well be your biggest asset.
Don't stretch yourself. Yes, the property you're considering buying had great potential, is in the right area, tenants will be easy to find ... but it's right at the top of your budget. No healthy contingency, no go. Many of the property programs you'll see on television all end up fine, they struggled and came though. At what cost to their health, sanity and relationships - but more importantly they are the lucky ones. If the numbers don't add up, don't do it - maths never lies (well, it depends on the accountant !)
Once you've found the property, don't underestimate the time it will take to make it ready for rental. Yes, your builder may say 2 months, till they find an unforeseen problem, delay in planning consent, and so on. Set realistic timetables with a contingency. You have contingencies in your budgets, have contingencies in your timescale's. Your builder says 2 months, make it 2 and a half or three months. So that's an extra month without rental income - factor it in to the equation.
Buying property is investment, in money, time and effort. Do your homework, have a plan and stick to it. Get the best advice from the best people. Have a solid team of advisors and contractors around you. Above all, never damage your existing investments for the sake of a new one. better to steer clear than crash.
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