Tag Archives: investment
Investment Property portfolios – 6 Key Strategies for a smart loan (Page 1 of 2)
A booming market for buy-to-let and investment property portfolios has created the need for new types of mortgages and investment property loan facilities. Securing finance for buy to let and holiday rental properties classed as an investment property loan, has never been easier and many of the main lenders have transformed their lending criteria to support property entrepreneurs.
Historically lenders were reluctant to support property investors unless they had serious investment equity ranging from 25-40% of a given properties value. The latest range of financial offerings, are now more in-line with existing household mortgages where buy to let loans are available for up to 90% of the value of the property. The criteria for lending, depends very much on the anticipated yields for the property and to some degree on solid business plans and logic that reflect capital growth in the investment. With a myriad of product offerings available it maybe difficult for a prospective property investor to determine what constitutes a good offer from a financial institution.
The best investment property lenders will look and consider 6 key elements in their risk assessment. So it is very important that you as the proposer understand clearly and prepare in advance a plan that accurately presents your facts in order to pitch smartly to get the finance you need.
6 key Investment Property Loan points
Equity available Know what you have in terms of tangible equity in your home, other investments in assets, and liquidity. Use this valuable information to form the basis of calculating your security to finance the investment plan. This ensures to the lender that you have a sound knowledge of your strategy in investing and you have a good consideration in managing your risk.
Interest Rate Percentages It is generally anticipated that the higher the investment deposit the better the mortgage rate. Buy-to-let mortgages rarely attract the discounts that home mortgages attain. However interest rate benefits are gained if you are prepared to put up front 20 25% of the loan value. Try and avoid low deposits as the rates for larger deposits will be more attractive both in the short-term overhead reduction and long-term gain.
Current debts Ideally all outstanding mortgage and loan liabilities or commitments should be understood and declared when requesting the finance. This will determine the maximum loan available to you for your investment project. Ideally this should be considered in advance of any property speculation or viewing of proposed properties. You may also find through this process that it presents an excellent opportunity to consolidate current finance and reduce overheads through the consolidation process.
Current Income or Salary Lenders will often consider salary and income within the mix of calculating repayments. Multiples of salary are often considered along with the yields or estimated monthly rental incomes from the property portfolio. Important to the property investment will be the current state of the property and whether the property requires investment in refurbishment or modification to enable tenants or renters to occupy.
Venture Capital 101 (Page 1 of 6)
I. WHAT IS VENTURE CAPITAL?
Venture capital is money provided by an outside investor to finance a new, growing, or troubled business. The venture capitalist provides the funding knowing that theres a significant risk associated with the companys future profits and cash flow. Capital is invested in exchange for an equity stake in the business rather than given as a loan, and the investor hopes the investment will yield a better-than-average return.
Venture capital is an important source of funding for start-up and other companies that have a limited operating history and dont have access to capital markets. A venture capital firm (VC) typically looks for new and small businesses with a perceived long-term growth potential that will result in a large payout for investors.
A venture capitalist is not necessarily just one wealthy financier. Most VCs are limited partnerships that have a fund of pooled investment capital with which to invest in a number of companies. They vary in size from firms that manage just a few million dollars worth of investments to much larger VCs that may have billions of dollars invested in companies all over the world. VCs may be a small group of investors or an affiliate or subsidiary of a large commercial bank, investment bank, or insurance company that makes investments on behalf clients of the parent company or outside investors. In any case, the VC aims to use its business knowledge, experience and expertise to fund and nurture companies that will yield a substantial return on the VCs investment, generally within three to seven years.
Not all VC investments pay off. The failure rate can be quite high, and in fact, anywhere from 20 percent to 90 percent of portfolio companies may fail to return on the VCs investment. On the other hand, if a VC does well, a fund can offer returns of 300 to 1,000 percent.
In additional to a portion of the equity, a VC expects to have a say in how its portfolio company operates. Ideally, the VC fosters growth at the company through its involvement in managerial, strategic, and planning decisions. To do this, the VC relies on the expertise of its general partners who may be former CEOs, bankers, or experts in a particular industry. In most cases, one or more general partners of the VC take Board of Director positions at a portfolio company. They may also help recruit key executives to the portfolio company.
Its important to do your homework before approaching a VC for funding, to make sure youre targeting the right potential partner for your business needs. Not all VCs invest in start-ups. While some may invest small amounts of seed capital for very early ventures, many focus on early or expansion funding (see section III. Types of Funding), while still others may invest at the end of the business cycle, specializing in buyouts, turnarounds, or recapitalizations.
VCs may be generalists that invest in a variety of industries and locations. More typically, they specialize in a particular industry. Make sure your company falls within the VCs target industry before you make your pitch a VC thats focused on biotechnology start-ups will not consider your request for later-stage funding for expansion of your semiconductor firm. You can often gain insight into a VCs investment preferences by reviewing its website.