Adapting to An Uneven Mixed-use Property Investment: Tips & Strategies

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Tenants can make or break any property investment plan. Landlords may be dependant on the income they provide, and so will need to secure them asap. If a tenant fails to adhere to their tenancy agreement, it can create costly headaches for the owner. Without renters in place, some lenders may not even be willing to work with would-be borrowers.

This could prove especially stressful for property investors who have multiple facets to their holdings. A circumstance that our underwriter, Maria Krishnarajah, has plenty of experience with.

“Mixed-use properties can be a nightmare to refinance for some investors,” she said.

“There are the fairly common scenarios which keep popping up. A property may contain an owner-occupied café, with a residential flat sitting above it.

“In a perfect world, both of these elements will be performing as they should be. But, we rarely live in a perfect world.”

Often, property investors turn to us for refinancing capital to repay first charge lenders, and spruce up an asset to enhance its desirability. Once this is all wrapped up, the borrower will then likely move onto long-term finance at the end of our term. Maria broke down how this is often easier said than done though.

“Sometimes, the residential and commercial parts of the property won’t be in sync. I’ll go through the accounts and see that the café is generating plenty of profit. But then we’ll see that the flat is empty, and the investor is struggling to secure tenants for it.

“In this market, landlords need as many revenue streams as possible, and a lack of one may raise red flags with mainstream lenders.”

Fortunately, most borrowers are prepared for this and have contingency plans in place. A borrower’s primary exit strategy may involve moving onto long-term finance, but they often are happy to sell their asset to cover our funding if needed.

“In this kind of case, where it’s obvious that finding an external lender may prove challenging or delay things, I’d look to include a contingency that the property would be put on the market for sale if long-term finance hadn’t been secured by a certain date.

“This does two things. It ensures we’re able to deliver our funding comfortably, and protects the borrower from long-term costly repercussions.

“To help this plan along, we’d utilise our internal tools and resources to either confirm interest from an external lender, or gather evidence that the borrower would have options for a sale.”

We’d all like our plans to go from A to B without a hiccup. But often, it’s those who have backup plans in place who succeed more often than not. At Market Financial Solutions, we will help support our borrowers wherever possible with their plan B’s, alternative routes, and unforeseen complications.

FAQs

What types of properties can Market Financial Solutions finance?

We offer bridging loans and buy-to-let mortgages for a wide range of property types, including residential, commercial, and mixed-use properties. This encompasses assets such as shops with flats above, student accommodation blocks, houses in multiple occupation (HMOs), and light industrial units. We provide finance for both freehold and leasehold properties, accommodating various investment strategies and development plans.

How does you assess the viability of a mixed-use property investment?

We evaluate the viability of mixed-use property investments through a comprehensive underwriting process. This includes assessing the property’s location, rental income potential, tenant stability, and the borrower’s experience and financial standing. Our case-by-case approach allows for a nuanced understanding of each investment’s potential, ensuring that financing is aligned with the investor’s objectives and the property’s characteristics.

Are owner-occupiers eligible for a loan?

Yes, owner-occupiers are eligible for loans with Market Financial Solutions, particularly for commercial owner-occupier finance. This type of financing is designed for individuals or businesses purchasing a property to use as their primary place of business. We offers tailored solutions for various property types, including offices, retail spaces, and light industrial units. We can provide flexibility in underwriting, considering factors such as the borrower’s business sector, experience, and financial standing. We also offer bespoke products like Bridge Fusion, which combines bridging and buy-to-let finance, suitable for owner-occupiers with specific needs.

What exit strategies do you support for mixed-use properties?

We support various exit strategies for mixed-use properties, including the sale of the property to repay the loan or refinancing to secure a long-term mortgage or commercial loan.

Our flexible loan terms and tailored solutions accommodate different exit strategies, depending on the investor’s plans and the property’s potential.