Buying and renovating a property in order to sell it can make you a great deal of money. After discovering a property you can buy, refurbish, and sell, you may need a large sum of money to help you finance the project.
Many investors and developers make use of different types of property development finance to fund their projects. Unless you have a huge capital outlay, you will need to seek additional funding.
Approaching traditional banks for funding may not work for you because their process is usually too long to fit into your business strategy and their requirements are often difficult to meet. To quickly access the finance you want, you need to look at alternative sources.
An Alternative Finance Source
Many developers are moving away from conventional lenders to specialised lenders to help them fund their next property development project.
If you have found the property you will like to acquire, refurbish, and flip and you need quick funding but don’t want to approach traditional banks and mortgages to help you finance the acquisition and renovation, then the best option you may want to consider is refurbishment bridging finance.
What Is Refurbishment Bridging Finance?
A refurbishment bridging finance is a short-term loan that can be used to finance a property renovation. It helps you close the gap you have in your finance.
More and more developers are turning to this form of property development finance as a viable alternative.
Bridging Loans Offer Flexible Payment of Interest
When you use a bridging loan as a property finance option, you don’t have to worry about paying interest every month. Bridging loans come with a feature known as interest roll-up that enables you to pay your interest once as a lump sum at the end of your loan term.
This enables you to focus on your property development and have sufficient finance to fund your property renovation project.
You Need to Have a Viable Exit Strategy
Your application for a bridging loan will not go through without a viable exit strategy. An exit strategy is how you plan to repay the loan when due.
In the case of a refurbishment project, your exit plan could be the money you get from the sale of the property you are renovating once it’s completed and sold. Lenders will examine your property for viability, if it is feasible then you will be granted the loan.
Case Study
A certain real estate developer wanted to buy a property he saw in Mayfield, refurbish it, and sell it at a higher price.
But to sell it at the price he set for the property, he needed to add some value to the property by renovating it and extending it – it was a heavy refurbishment.
The developer’s first port of call was high street banks but he was turned down because he couldn’t meet the banks’ criteria and the banks were not ready to finance him in the short-term.
After his unsuccessful attempts, he turned to bridge finance and within 48 hours he was able to raise £355,000 additional finance to buy the property and £102,000 to carry out the refurbishment of the property.