ACCESSING CAPITAL FOR COSTS AND OPPORTUNITES
By Jonathan Rubins, Director at Alternative Bridging Corporation
The Covid pandemic has triggered an unprecedented amount of change over the last year, but one thing that hasn’t changed is the growing list of considerations for property investors who want to stay on the right side of regulation.
Last year, rules were introduced requiring all tenanted properties to achieve at least an E rating on their Energy Performance Certificate and this April saw the Electrical Installation Condition Report (EICR) become mandatory for all existing tenancies.
The EICR was actually introduced last July as part of the Electrical Safety Standards in the Private Rented Sector regulations but, as with most of these things, it initially only applied to new tenancies to provide a period during which landlords could bring properties with existing tenants up to standard. That period has now passed, and all landlords are now obliged to have a property inspected every five years by a ‘suitably qualified and competent person’ and provide their tenants with a copy of the report within 28 days of the inspection.
If you are a property investor and you haven’t arranged for an EICR yet, you should start the process as soon as possible. The costs of arranging an inspection and a certificate may only be around £120, but the costs of not arranging one could be much higher. The regulations state that local authorities may impose a financial penalty of up to £30,000 on landlords who are in breach of their duties.
Electrical safety is just one area where investors need to ensure that their property is both up to scratch and has the correct documentation. I have already mentioned the EPC regulations, and there’s the Gas Safety certificate, smoke alarms and carbon monoxide alarms. There are also separate regulations and licensing requirements for HMOs and potentially unlimited fines for HMOs that don’t meet fire safety standards.
It is absolutely right that there is such a robust safety framework in place on rental properties, but it is also potentially expensive for investors – not just to have properties inspected, but to pay for any remedial work that is required and, if things do slip, cover any fines. Increasingly, running a successful property portfolio requires access to a large contingency pot to cover costs. However, it’s inefficient for investors to hold too much capital as cash, particularly in today’s low interest rate environment, and it can often be better deployed helping to grow a portfolio.
So, what options are there for investors who want quick access to working capital?
One option is the Alternative Overdraft, which is a product we offer at Alternative Bridging Corporations. It’s a flexible loan facility that enables investors to access funds on 24 hours’ notice, with the opportunity to draw, repay or reduce funds to match their needs.
It avoids expensive setting up charges each time a loan is needed and can be secured by a first or second charge over residential or commercial property. The minimum loan size is £250,000, but a facility like this gives property investors great flexibility and confidence that they are always in a strong position to cover unexpected costs or make the most of unanticipated opportunities.
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