Deal hunters: The 1% are borrowing against their real estate portfolios to find new opportunities

Some are borrowing to take advantage of the weakening economy

TRD New York TRD WEEKEND EDITION /
Apr.April 12, 2020 12:00 PM
The coronavirus-weakened economy means assets are on sale (Credit: iStock)

The coronavirus-weakened economy means assets are on sale (Credit: iStock)

Wealthy homeowners are putting their mansions and estates as collateral for loans to repay debts or even scoop up cheap assets now available in the coronavirus-weakened economy.

Real estate makes up a sizable chunk of many wealthy families’ portfolios and many properties aren’t mortgaged. Low interest rates mean they can borrow for cheap against those properties, according to Bloomberg.

“There is an abundance of mortgage finance available, and using real estate to secure a funding line can open plenty of opportunity,” said Islay Robinson, CEO of London-based mortgage broker Enness. “Especially if you are borrowing at record low rates.”

Robinson said five-year loans are available for rates around 1.5 percent to 3 percent. Some borrowers see debt as a better option than selling off other assets in a down market to raise funds.

Some take out loans to pay back loans secured by stock. Others are using it to capitalize on bargains brought on by the economic downturn.

A family based in Asia took out a $50 million loan against a portfolio of London properties to fund other property purchases and private equity investments. Another Enness client took out 15 million pounds on a London property also to buy up cheap properties.

The bets can pay off if borrowers can hold out until the global economy — or at least the value of their portfolios — picks back up. Knight Frank projects that London home prices will fall about two percent this year, but grow by six percent next year. [Bloomberg]


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