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Bridging loans help investors refurbish poorly maintained property

Posted: August 8, 2018

If a property has not been well looked after, it puts off many homebuyers because they don’t want to be bothered with paying for and organising the refurbishment work. This has meant that these properties tend to sell at low prices, providing opportunities for investors who use bridging finance for the construction work.

Many homes have been occupied by the same family for decades who have done no improvement work. When the home is empty after the last member of the household dies, relatives may be keen to sell the house quickly and are prepared to sell at a low price.

If a home is in a bad condition or the surveyor’s report has several major defects listed, many lenders will refuse to provide a mortgage for it. Alternative lenders can provide bridging finance to help towards the purchase of the property and the refurbishment work. Loans of up to £5m are available providing there is a plan for when and how the loan will be repaid. Often, the exit strategy is the sale of the property after the refurbishment work has added value.

One source of houses in disrepair are property auctions, but purchases have to be completed within 28 days of the auction. Where mortgages are available for these houses, they can take a long time to arrange, so a bridging loan can be used to complete purchases.

Bridging finance is also available for commercial and semi-commercial property. In some areas, prices for commercial property in poor condition have fallen by 15%.