How can bridging finance boost your buy to let portfolio? Here, we look at how you can use bridging finance to maximise your profits.
Bridging finance is becoming a much more popular property finance type, and for good reason. As more landlords use bridging finance, we share 5 common opportunities available with this type of finance.
1. Property Refurbishments
One main way property investors use bridging finance is to fund repairs on existing properties. This can include making aesthetic improvements, upgrading utilities increasing the EPC rating. These projects can become expensive rather quickly, and bridging finance is a great way to access the funds to cover the cost of the improvements quickly.
Using bridging finance for this is a great way to significantly increase the property’s value and your rental income. Property Investors typically exit onto a buy to let mortgage or sell the property for a profit. Either way, the proceeds are used to repay the bridging loan.
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2. Auction Purchases
Bridging finance is best known for auction purchases. When buying at property at auction, you need to finance the purchase extremely quickly. This can often be in as little as 28 days, so accessing the funding fast is essential.
Standard buy to let mortgages are unsuitable here, so bridging finance is the ideal solution. Once the purchase is complete, landlords can switch to a buy-to-let mortgage. This is possible if the property is in good condition and does not need repairs.
If you are interested in purchasing at auction, it’s essential you speak to our mortgage experts first. We can help you explore the type of bridging rates you can access and check how much you can borrow. This is essential for making well-informed property investment decisions in the auction room, and will prevent delays with your application.
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3. Chain-Breaking
Using bridging for chain-breaking allows you to purchase a property either before funds are released from another property sale, or to prevent a purchase chain breaking down if your mortgage application is taking too long. This way, you make the buying process easier. You also reduce the chances of delays and won’t have to worry about missing out on the purchase.
4. Portfolio Expansion
Bridging finance is a great way to purchase new property investments quickly. In today's competitive property market, this is a good way to avoid delays and help you secure a new property for your portfolio.
As a type of short-term finance, landlords can quickly secure properties without the risk of losing out to other buyers or facing long property chains (as mentioned above). This helps you to expand your portfolio more efficiently, and you can exit onto a buy to let loan once the purchase has completed.
5. HMO Conversions
Depending on the scale of the project, you may be able to use bridging finance to convert your existing buy to let into an HMO. HMOs typically benefit from much higher rental yields than standard buy to lets, and the demand for these properties continues to grow.
If you need to carry out any heavy refurbishments to the property, such as an extension, then you will need to secure heavy refurbishment finance. However, bridging finance is great for smaller renovation work, such as fitting new doors or kitchens, which could allow you to convert your property into an HMO. Speak to one of our experts to explore the best finance option for you.
Visit our bridging finance page here for more information.
Speak to an expert
To learn how bridging finance can help your property portfolio, submit an enquiry here. You can also call us at 0345 345 6788 to find out more about the types of bridging rates available.
