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In something of a post script to Series 3 on raising finance in property, I am joined on the show by Amit Ramnani from Fernhill Partners. Amit is a wealth advisor and he explained to me how we can use an existing investment portfolio, consisting of various financial instruments such as stocks and shares, bonds and gilts, funds, cash, etc. to act as collateral security for a loan that can be used for our property activities. Lets look at leverage in a different kind of way this week then…
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OK, so not everyone has a £400k+ investment portfolio lying around I grant you that. That said, if you do happen to have been wisely investing for some time and have accumulated such an investment value then you may be able to use it as security for low-cost lending for property activities. Contact Amit to get hold of his case studies and find out more details of how to go about this.
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Transcription of the show
Hello and welcome to another episode of The Property Voice podcast. My name is Richard Brown and it’s a pleasure to have you join me on the show again today.
In something of a post script to Series 3 on raising finance in property, I am joined on the show by Amit Ramnani from Fernhill Partners. Amit is a wealth advisor and he explained to me how we can use an existing investment portfolio, consisting of various financial instruments such as stocks and shares, bonds and gilts, funds, cash, etc. to act as collateral security for a loan that can be used for our property activities. Let’s look at leverage in a different kind of way this week then…
Firstly, a disclaimer that Amit asked me to mention before the interview.
The information contained in this PODCAST is provided as an information service only and does not constitute financial product advice or tax advice. None of the information provided takes into account your personal objectives, financial situation or needs.
You must determine whether the information is appropriate in terms of your particular circumstances. For financial product advice, you should consider seeking independent financial and tax advice.
Right, with that out of the way, let’s take a listen to my interview with Amit now and I shall pick things up again at the end.
Property Chatter
Interview with Amit Ramnani
OK, so not everyone has a £400k+ investment portfolio lying around I grant you that. That said, if you do happen to have been wisely investing for some time and have accumulated such an investment value then you may be able to use it as security for low-cost lending for property activities.
Here are some potential applications of such a loan for property activities:
- As an alternative to cash and short-term bridging finance for short-term flips or buy-refurbish-refinance projects.
Why not use cash? Well, you could keep your cash invested into the fund that provides the security for the loan, which would mean that you would still be able to enjoy capital and income returns on the fund, whilst having access to a low-cost source of finance for your property activities.
Why not using bridging finance? Well, short-term lending in property is often expensive, with rates typically between 10% and up to 24% annualised being sought by short-term lenders. So, at something like 2.5% or so annualised, that’s quite a saving to be made on short-term borrowing and of course, it’s also using other people’s money in terms of the loan for added leverage.
Think of it something like an offset mortgage, only instead of the debt part of the offset costing you money, if invested wisely it could actually make you money on both the fund and also your property activities too.
- Medium-term development projects.
Similar to the flips and BRR example above, but perhaps instead using the funds to buy land for development or a property for conversion. The difference being timescales mostly as development projects are often longer than refurbishment projects.
- Rental property purchase deposits.
This one is possible taking the idea to an extreme as it could lead to 100% finance on a rental property. For this reason, I would be very wary of using the loan to finance deposits to be added to additional borrowing, as you could end up over-leveraging. However, in exceptional situations I could see it being a useful concept, such as in acquiring a block of flats or a small portfolio say, where the idea is to sell off part of the block purchase to repay some of the deposit debt and be left with probably a discounted rental asset or assets thereafter.
In terms of the type of people this could potentially work for, think asset-rich / cash or income poor, ex-pats, high income or bonused employees, company owners sitting on cash, high net worth individuals with an existing investment portfolio outside of property, trust fund managers and trustees and so on.
OK, enough already…I can here Amit’s disclaimer ringing in my ears again, so better that I stop with the creative thinking for now.
By all means, contact Amit through his website Fernhill Partners to get hold of his case studies and find out more details of how to go about this if it happens to resonate. If this episode was not for you, I am sorry for that…but I am trying to tackle a range of financing techniques that could work across the spectrum. Some may be open to you, whilst others might not be. But if nothing else, I hope it was interesting.
Ok, so that’s me for this week. Remember that you can email me podcast@thepropertyvoice.net if you want to talk about anything from today’s show or more generally in property investing, the show notes will be over at the website www.thepropertyvoice.net
But for now, all I want to say is thank you very much for listening once again this week and until next time on The Property Voice Podcast…it’s ciao-ciao.