Using a Bridging Loan
For Property Development
* 7 Things to Know
Buy-refurbish-refinance is a fantastic (and very popular) strategy but it is difficult to get right and newcomers to the industry should approach it with caution.
In a nutshell, it involves purchasing a house, adding value through refurbishment and renovation work and then re-mortgaging the house at the higher market value.
This way, you can reclaim your expenses (your deposit and the money you have spent on the work done) and move onto the next project with.
I won't lie, to be successful in this approach is difficult, really difficult.
And the risks are huge.
You need to be able to find discounted properties (below market value). You need to be confident in your ability to add value to your property.
And you need to have good financial advice, regarding mortgage products.
But more than that, you need to be in a position where you can move quickly. The faster you can go, the less it's going to cost you.
Which brings us to money.
Refurbishment projects can be/are very expensive and unless you have deep pockets you are going to have to find that money from somewhere.
One possible answer is to partner with another investor. Joint venture projects are common in this industry, where one partner supplies the money and the other, the expertise and the graft.
Another answer is bridging finance.
This is what we are going to look at today.
And to do so, we have asked for help from Richard Scull from Affirmative Finance, who has kindly agreed to run through the following 7 facts about using bridging loans for property development projects.
And as always, nothing here should be taken as financial advice. Always seek help from a qualified expert before entering into any kind of financial arrangement.
With that said, it's over to you, Richard, and it's over and out, from me.
7 Things to Know About Bridging Loans for Property Development
By Richard Scull
Richard Scull is Head of Underwriting with Affirmative Finance, a Manchester-based bridging finance lender. Affirmative Finance offers bridging loan options to property developers, financial intermediaries and individuals who are looking for a fast and flexible short term finance option to complete their projects. Affirmative Finance is authorised and regulated by the Financial Conduct Authority and a Member of the Council of Mortgage Lenders.
What Is A Bridging Loan?
Bridging loans are useful for those who require fast access to a secured short-term loan, perhaps to overcome a specific issue that they are facing or simply, to be able to complete on a property quickly.
This can make them ideal for property developers and investors who often need to make quick purchases on properties, which they intend to sell (using a flip strategy) or re-finance, within a limited time frame.