Bridging loans uses to help cash in on record rental incomes

With rental incomes up to an all time high it has never been a better time to invest in buy to let properties, consequently more and more people are looking for property to purchase in order to rent out. All around the country monthly income from property rentals have been increasing, therefore creating a high demand for suitable rental property.

Bridging loans are increasingly being used to finance the purchase of property at auction. There are many reasons why bridging finance is an excellent way of raising finance for this type of property purchase. Firstly this is because bridging loans can be arranged quickly and this therefore enables auction purchases to complete within the usual 28 day time limit. Secondly bridging loans are often the cheapest option when raising finance for a short period of time due to the high set up costs and early redemption penalties that are associated with longer term finance facilities. If the property purchased at auction is intended to be turned around and sold on for a quick profit then bridging finance is an idea choice for funding. Thirdly if the property is in need of some minor or major renovation bridging finance is a flexible option. Other sources of finance may not be available, may have stipulations or be too slow to arrange. Once the work has been completed the property can then be refinanced using a commercial mortgage or buy to let mortgage, which will repay the bridging loan and provide a more suitable long term finance facility. Alternatively the completed property can be sold for a quick profit to someone keen to enter the buy to let market or someone who is looking to expand their existing property portfolio.

A popular method of creating rental units is to take a large old 4, 5 or 6 bedroom property and convert it into 2 or 3 flats. Having obtained the necessary planning permission bridging loans are often used to finance the conversion work. Once the conversion has been completed the property will be split into separate deeds. The property can then be refinanced using a commercial mortgage or separate buy to let mortgages on taken out on each flat. This will refinance any existing borrowing and also pay back the bridging loan. Alternatively some or all of the flats can be sold and the proceeds used to repay the bridging loan and any other finance secured on the property.