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Using existing assets to help your clients diversify new ones

Using existing assets to help your clients diversify new ones

By Jonathan Rubins, Director


Jonathan Rubins, Director of Alternative Bridging Corporation

Jonathan Rubins, Director of Alternative Bridging Corporation

Diversification

Any successful investor will tell you about the benefits of diversification as a way of reducing market volatility and achieving long-term plans. There are different ways to diversify of course, perhaps across different asset classes or even across different types of asset within a particular sector. For example, we’re working with a growing number of customers who are spreading their investment across both residential and commercial property assets.

The two markets perform differently. Over the last year for example, the June Halifax House Price Index found that the average value of a home has increased by 9.5% over the last year, while CBRE reported that capital growth on commercial property was just 1.7%.

The commercial sector has clearly experienced a more challenging period than the residential market, but given that most shops were forced to close for much of 2020 and offices have remained empty, the fact there was still capital growth demonstrates the stability of this part of the market. Over the course of the last year, CBRE says that commercial rental values grew by just 0.2% and equivalent yields fell by 0.04%, so there’s a good chance that some owners of commercial property may be looking to sell some assets, presenting an opportunity for new investors. Furthermore, as the economy begins to grind back into gear, the outlook for commercial property remains positive. According to RICS, a growing number of surveyors consider the commercial property market conditions to be consistent with the early stages of an upturn.

So what are your options?

So, if you have clients who want to benefit from this upturn and are looking to buy commercial property, the bridging market can provide a good way to finance their purchase. Maximum LTVs tend to be 65% to 70%, but there are ways for investors with smaller cash deposits to achieve higher LTVs. If your clients have existing investment properties in their portfolio, residential or commercial, they could use those assets to achieve greater leverage on the property they are purchasing. At Alternative Bridging Corporation, we frequently work with brokers on cross charge financing with a background security, on either a first or second charge basis, that can essentially provide 100% funding on the purchase.

Diversification is important in any investment strategy and, with a lender that can consider cross charges, your clients can use their existing assets to help them diversify into new ones.


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Click here to read the article in Commercial Reporter.

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