9 strategies to finance your property purchases

The obvious way to purchase an investment property is a buy-to-let mortgage.  This is great if you’re building a property portfolio and intend to have a mortgage for a long period and pay it off over time.  

However, some investors aren’t buying to let, they may have a buy-to-sell strategy or buy to convert to alternative use – for instance to an HMO, commercial property to flats or serviced accommodation.  Standard BTL mortgages don’t work for any of these options.

Fortunately, there are other options for the savvy property investor.

Inspired funding

When you really want to take your property investment up a level you need to get familiar with bridging finance.  Don’t think of it as a ‘mortgage’, see it as ‘funding my project’.

Bridging offers an excellent way to move your project on and make a substantial profit – more than compensating for the increased interest rate you’ll pay.

So why use bridging finance?

1. You can buy property faster: with the right solicitor on board you can complete a property transaction in less than 28 days.
2. You can buy properties even if your credit record isn’t perfect: if you have a weak credit record or even CCJs, you may still be able to access bridging finance.
3. You can buy properties with little money down: not no money down, but if you know how, it’s possible to finance your deal with significantly smaller deposits than the usual 25%.
4. You can borrow on the VALUE of the property: even if you’ve negotiated a much lower purchase price.  You do need to know the right lenders to do this, though.
5. You can buy property at auction: even though auctions expect completion in 28 days (sometimes less).  You can even arrive at the auction knowing that your finance is already to go.
6. You can buy repossessions: not from the distressed seller who is under threat of repossession, but from mortgage lenders who have already repossessed a property.  Most repossession sales are looking for completion in 28 days or less.
7. You can buy properties that are unmortgageable: there are many reasons why a property could be unmortgageable, most of them don’t make the property a bad deal, but will result in being able to negotiate a much lower purchase price.
8. You can refurb properties before you complete: if you exchange contracts with a delayed completion date you can complete your refurb and complete post refurb.  
9. You can operate like a cash buyer: the nature of bridging finance means that you can turn a property deal around as quickly as someone with the full purchase price sitting in their bank account.

Your potential profit is much more than getting a BTL mortgage and then remortgaging.

Early redemption of a mortgage won’t do your credit record any good at all either.  If you do it repeatedly you’ll soon find mortgage lenders don’t want to know. Bridging finance gives you the freedom to turn around short-term projects.

The down side

Bridging lenders are picky over the area they will lend in.  So some only lend on properties in London, some only in the home counties, some only in the south-east, etc.

Also you need the right lender for your project.  Some lenders don’t lend on conversions, some not on commercial properties and so on.

This means that you need to know your bridgers – and there are dozens of them.  They’re all different and their fees are all different, the structure of the deals are different – so it can be a minefield for the untutored investor.  However, that shouldn’t put you off – what you need is a good broker with the right kind of experience.