With increased taxes on buy to let properties, reducing the potential for good returns and long-term investment, the market has undoubtedly taken a hit. However, there are still opportunities to consider, including ways to utilise bridging finance to support the purchase of a property and realise a healthy return.
The best deals on investment properties are often struck by clients who can complete quickly and so one of the most significant advantages of purchasing a buy-to-let property using bridging finance is the speed of completion. Bridging finance can effectively turn the applicant into a cash buy, which gives them complete flexibility when an opportunity does arise. It is key, of course, that your lender remains consistent with their decision. At BFS, we make fully backed credit decisions within hours.
Bridging loans also provide a fast and straightforward solution when there is not enough time to arrange a mortgage or when a property is considered unmortgageable because it requires significant refurbishment works. Traditional buy-to-let mortgages are unsuitable in a scenario whereby a client needs to raise short term funding for property conversion or property refurbishment because of the length of time they take to execute and because of early repayment penalties. Bridging finance allows developers to carry out the works quickly and cost-effectively, ultimately creating a more desirable and valuable rental property.
Undoubtedly, bridging finance has also become more useful to landlords in recent years. Ask any successful landlord the secret behind growing their portfolio over the years and most will highlight that speed, flexibility and liquid cash has enabled them to source and acquire ‘bargain’ properties at the right time. Clearly bridging is a tool that has helped many to achieve this when their own cash reserves have been allocated towards other projects for example.
There is often a substantial increase in valuation once a property has been converted into an HMO. Many buy-to-let lenders have a minimum tern before they will consider refinancing onto a buy-to-let mortgage using the uplifted value. A fast bridging loan in this scenario fits perfectly for a buy-to-let landlord, enabling them to line up the most competitive term product with their broker.
Indeed, the rise in the number of HMO properties and associated regulations has opened several avenues for bridging finance. Clearly, there is the requirement for funding refurbishment of such properties which can run from a small amount into six figures. At BFS our minimum loan is £25,000 making quick cheap funds readily available for even the smaller projects.