Despite the challenges of the past few years, it’s clear property investors are still keen to add to their portfolios — and bridging loans are an excellent way to help them move quickly when an opportunity presents itself.
Indeed, ASTL’s Q4 2021 figures showed that the bridging market saw record growth, with both completions and applications hitting record highs.
The strength of the market is pushing lenders to be a bit more creative in the way they operate and the cases they will consider. And if you know how to package the loan properly, you may even be able to secure more than 100% LTV for your client.
Paying only the fees
We had a case just last month which demonstrated this well. The client was an experienced developer and able to borrow slightly over 100% LTV by putting in additional security. What’s more, because of the way the deal was structured, all the client actually had to pay was the valuation fee and legal costs.
The client had spotted a great opportunity: a property in a poor, rundown condition, but in a highly sought-after area. Ultimately, all it needs is some TLC in order to turn it into the sort of property that would have regular buyers excited — and at a much higher price to boot.
As an experienced investor, the client recognised the potential immediately and wanted to move quickly in order to secure the property before it caught the eye of others. However, with no cash at hand, this could have presented a problem.
We were able to help them in a creative way, using land the client owned as part of a wider development, as security. It meant he was able to borrow more than 100% of the property’s value, without having to put down any cash beyond a couple of relatively minor fees.
There is a significant profit on the horizon from the deal too. The refurbishment work is likely to cost around £40,000, yet the agents and valuers in the area believe that, once completed, it could be sold on for a profit of upwards of £150,000.
Not bad for a couple of months of work, with a property in a desirable area brought back into use.
Understanding the market
The reality is that obtaining the funds in this way isn’t possible for all clients, and it isn’t going to be an option with all lenders. Ultimately, it wouldn’t have been possible without a high level of market knowledge.
Not all lenders will be comfortable lending at this sort of LTV and, throw in the fact the security being used was land rather than an existing property, it becomes even more challenging.
The bridging sector is regarded as a specialist area of the market for good reason, it does take some real expertise and understanding in order to help clients with cases that are a little out of the ordinary but, if you do have those skills, then the case can get over the line.
Partnerships make a difference
Far more advisers are becoming aware of the potential the bridging market offers and want to find ways to open those lending options up to their clients.
That’s why partnering with experts in this sector makes so much sense. These products can be extremely specialist, with the criteria employed by different lenders varying significantly.
The bridging market is on the rise; it’s up to advisers to think carefully about precisely how they can deliver these products to their clients.