Bridging finance is one of those subjects where the majority of people – even property people – do that sharp intake of breath and shake their heads. It’s seen as expensive and ‘risky’ – akin to the kind of deal you might get into with one of those high-interest loan companies like Wonga.
It’s not. You just need a little understanding.
Here are some the myths that need blowing out of the water:
With a reputable bridging lender (and I only deal with these) repossession is their last option not their first option. They’ll work with any borrower who communicates openly with them. If you think you’re going to run over term most decent bridgers will work with you to find a solution to repay your loan. It will cost you more, but you don’t lose your investment altogether (although you will probably take the hit out of your profit).
Property investment can be a lonely career as so many people – who are not in it and don’t know much about it – consider it to be a mug’s game, risky and not a ‘proper job’.
I think it’s a bit like Twitter (which is also a network), people either ‘get it’ or they don’t. I know lots of people who think Twitter is an ideal way to make contacts – and I know quite a few who think it’s a massive waste of time! My social media expert friends tell me it’s an exercise in joining up the dots – it’s not who you know, it’s who they know.
I speak at many property networking events and they are generally well-attended, and I know there are a huge number of property investors who don’t go to networking meets.
Attending your local BNI or other business network probably isn’t going to be a huge help to you as a property investor. You’ll...
If you’re looking at getting into new builds as part of your property investment, you need to get to grips with a different kind of funding.
You can’t get buy-to-let (BTL) mortgages for a new build and bridging lenders see this as a specialised area. However, there are lenders who do specialise in development finance.
Before I go any further, we are not talking about building your dream home a la Grand Designs. There are mortgages for people who want to self-build, but as a property investor, you will be looking for something different.
Development finance is usually for new build projects on greenfield sites, or demolishing an existing building on a brownfield site and rebuilding, or, in some circumstances, major conversions, but only if significant structural work is required.
First you will need to jump through some hoops!
Number 1 is experience.
Development finance lenders need to be confident that you know what...
For most people property deals require a substantial wad of cash to get into the game, but that isn’t always the case.
Typically a mortgage requires 25% down – and that’s before you start doing the refurb. Then there are the properties that are basically sound, but aren’t in good enough condition to live in – and which no mortgage lender will even consider.
Properties that need a serious facelift are unmortgageable – but they also offer the investor an excellent deal. Once the work is done they’re worth much, much more than the purchase price and the return on investment can be substantial – but without that essential cash they tend to be the preserve of cash buyers.
However, there are ways around this challenge – and they’re legal and are very profitable for the investor.
Two of my clients came to me for help with very different outcomes.
The first client –...
I have made an offer on a flat which has a short lease of 71 years. I was told by the estate agent that it would only be £200 to buy a 100 year lease, because the current owner was looking at extending it. I have been looking online and the cost seems to be more around £10,000 or so.
I have emailed the solicitor and asked the estate agent again, but no one is answering my questions. It's so annoying, should my solicitor answer quicker or is this the norm? I don't want to waste my time if the lease extension is too pricey.
I wanted to buy cash to mortgage later, which would also release most of the money I spend on it. But if my money is stuck in one property when I could be buying more then it's not a good decision to buy.
71 years is mortgageable, but you are planning to buy in cash so that’s not an issue for you. Once you extend the lease it is certainly mortgageable.
The sensible strategy here is clear:...
As a new property investor with an abundance of desire, I see my strategy will be to mortgage at 75% LTV on an interest only, refurb and leave little or no money in, then re-mortgage and live off the cash flow and capital growth. What advantage would it be for me to buy property outright as a cash buyer using alternative financing, unless I found a few incredibly BMV unmortgageable properties?
How many properties is it your objective to own?
How many 25% deposits do you have the cash available to make?
For almost everyone, they have less cash than the number of properties that they aspire to own. So the simple truth is that everyone will run out of cash for deposits before they acquire the amount of properties they desire.
This brings into play one vital aspect, the knowledge and ability to recycle your cash; the need to understand and be able to use the same pot of cash to buy property after property.
To an extent I can see that you have grasped...
When you launch your property career it’s rare to be cash-rich. However, most investors own their own home – and frequently have substantial equity in their property. So it’s obvious – remortgage your home, release a chunk of money and you’re off and running. Or is it?
If you’ve got an unencumbered or low-geared (less than 25% LTV) property, you’ve got collateral. But why incur mortgage payments and interest when you don’t need to?
So if you decided to release equity to provide you with deposits for a few buy-to-let properties, you’ll have to make the application, wait for it to come through and then you’ve got a chunk of money sitting in your bank account. It’s not earning anything there, but you’re already paying interest on the mortgage and your monthly income will have to cover the mortgage payments.
I’ve been in property for decades and I remember the days of no-money-down property purchases, but these are long gone.
You can’t get a 24-hour remortgage any longer. Most property investors now see it as a longer haul as that 25% deposit means money is trapped in every property you buy. The processes to get your money out fast and move on to the next purchase that made property a great way to generate an income have gone.
Does that mean that it’s no longer possible?
No – you just need different strategies – and I’ve been teaching investors these for several years.
There is NO element of mortgage fraud in my strategies. At every stage there is full disclosure regarding the transaction to every lender involved. Using creative finance it is possible to buy property, leaving very little of your own money in the deal.
Using bridging finance with a clause that means works can be carried...
Why do some adverts say cash buyers only? I want to buy a property for £99K and have £27K but it says cash buyers only! It’s a gem too.
You should embrace 'cash buyer only' properties like your long lost rich uncle. They are serious money makers.
Cash buyer only' properties represent a fabulous buying opportunity
Why pay £99K for it? Stick in an outrageous offer for £69K. On the basis that
If you read my last blog post you’re probably wondering what those Ninja Investor Strategies I mentioned are:
They’re all possible using bridging finance with the right lenders to turn you into an investor who can operate like a cash buyer.
Here’s a brief overview of each one:
This is based on finding properties that are really cash-buyer only territory. This is usually because the vendor either wants a quick sale for some reason or because they are considered unmortgageable by buy-to-let lenders.
When a mortgage-dependent investor finds a property that clearly can’t be mortgaged they walk away. This leaves the field clear for the few investors that have the knowledge of how to buy this type of property. Generally, these are cash buyers, but with the right strategy you can operate as a cash...