Number crunching

Kate Taylor guides APC candidates through the property finance and funding competency

APC-SeriesProperty finance and funding underlies a lot of activity within property. The lower interest rates prevailing across much of the Western world along with a large range of financial products and improved benchmarking data, has meant that the investment market is becoming increasingly complex and international.

The property finance and funding competency covers a wide range of financial products for a range of purposes, from relatively straightforward residential mortgages to complex deals on commercial property, which may involve tiers of financial products from a range of sources.

The complexity can be staggering and off-putting to both candidates and assessors. Surveyors active in this market need to be financially literate, commercially aware and very sensitive to risk.

That said, on a lighter note, I recommend watching the 2015 film The Big Short and the 2014 film 99 Homes and reading Planet Property by former EG editor Peter Bill as research and revision into property funding and finance. They really help with the all-important holistic overview.

This competency is core to the property finance and investment pathway, which means that all candidates on it must declare competence. It is optional on the commercial property, valuation and residential pathways, which means that candidates may declare competence if they gain experience in this area.

Most of the candidates I see are commercial property candidates involved in asset and portfolio management, investment agency, fund management, corporate real estate management or strategic real estate consultancy.

There are a few pitfalls in this competency. Here is how to help avoid them at each level:

Level 1

The competency at level 1 requires a knowledge and understanding of the role and the importance of finance in property, including the different forms of finance and their sources. The main pitfall for candidates being questioned at level 1 is overthinking and not showing basic financial literacy.

For example, I would expect knowledge of senior versus junior debt and interest rates and why they vary, as well as an awareness of financial ratios such as the operating expense ratio, break-even ratio, debt coverage ratio and the classic loan-to-value ratio.

Don’t underestimate the importance of understanding basic financial vocabulary like mortgagee versus mortgagor, mortgage underwriters, real estate investment structures (such as REITs ), derivatives and securitisation. Show an awareness of the principles of gearing and why investors choose to leverage, and the difference between debt and equity. The basics are not complicated and it is important to be clear for the assessors.

A good knowledge of the finance market and current interest rates, from Bank of England base rate and LIBOR to average offers to investors, will be expected from candidates. This basic understanding often lets candidates down as they do not see the need to state the obvious.

Key to this competency (as well as to much of valuation) is an understanding of risk appetites and the post-global-crash financial climate.

Level 2

To demonstrate competency in your experience record you need to show competence in identifying factors that affect ability to obtain finance to fund projects and identify appropriate sources of finance. This will require applying your understanding of the principles of financial risk for different projects, people and purposes. This is where you can show range of experience as different lenders will have different risk appetites for different properties and different investors.

The typical activities declared will be comparing investment opportunities using investment appraisal techniques. Candidates will need to have specific examples of discounted cash flow and other appraisal techniques in practice.

A good example could also be the use of market indices such as RPI and IPD or balanced scorecards to benchmark projects and finance deals.

Candidates must be careful to show an understanding of analyses. A major pitfall in this area is for IT-literate candidates, or “Excel jockeys”, who fail to reflect and stand back and look at analysis results.

Level 3

Level 3 is about providing reasoned advice on maximising the viability of any funding situation and demonstrating the appreciation of the impact of property funding matters on the property market.

Reasoned advice is always difficult to provide in a high-stakes competency like property finance and funding. Candidates are not expected to be advising alone but working with an experienced professional under close supervision. Financial advisers need to be regulated by the Financial Conduct Authority and candidates are not expected to be regulated. Don’t forget that, in an APC context, client means any stakeholder – and that includes internal clients, such as your boss.

The best way to avoid any pitfalls is to keep the advice client property- or portfolio-specific and allow the client to determine their own level of risk aversion in conjunction with their financial adviser. In this context, property-specific means analysing a property’s financial performance in terms of income against cost and reporting to the client or advising a client of an internal rate of return after carrying out analysis techniques.

At the simplest level, advice to client in this competency can be explaining the mortgage market to a residential purchaser or advising a client which of the competing investments meets their financial targets.

Refinancing during property development is often used as an example and can make a good property finance and funding-based case study, provided that candidates resist the temptation to overcomplicate it.

Property finance and funding is one of my favourite competencies to question and can result in interesting conversations that allow a confident candidate the chance to shine in the final assessment interview.


  • Current interest rates
  • REIT and REOC market
  • Titan Europe 2006-3 plc v Colliers International UK plc (in liquidation) [2015] EWCA Civ 1083; [2016] EGLR 6


Level 1

  • What is the usual loan-to-value ratio for commercial property in your area?
  • What is a debt coverage ratio?
  • What are the different forms of financial product you are familiar with?

Level 2

  • Describe your analysis of the property performance for refinancing purposes.
  • What factors were relevant to your client’s finance offer in X case?
  • What were the key financial risks in X project?

Level 3

  • Describe your advice to client on the effects of finance at different rates-on-profit ratios.
  • Tell me why you suggested regearing the leases to your client?

*Don’t assume that the questions given here will be asked at an APC assessment. Assessors will focus on and pose questions on the basis of the candidate’s declared competencies, pathway guide requirements, up-to-date developed knowledge base and the examples provided in their summary of experience, etc.


The candidate needs to gain confidence talking about the finance market. Have conversations about the latest financial news and encourage questions. Don’t assume existing knowledge – the basic underpinning principles let many candidates down.


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Kate Taylor FRICS is an APC chair and a DeLever APC coach. Follow Kate Taylor and Jon Lever on Twitter: @katetay73593006 and @deleverapc

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