In a recent video, I explain the Bridge-To-Let strategy. This changes the game for property investing! It isn’t very profitable to simply buy a property and let it out. To make decent returns you will need to do something like buy, refurbish, refinance, rent (BRRR), but that does carry some risk. What if you can’t get a mortgage for the value you expected once you have refurbished? That’s where bridge-to-let comes in!
With a bridge-to-let loan the buy-to-let mortgage is agreed before you ever buy the property, and the lender indicates how much they anticipate valuing the property for. The video is a must watch for anyone wanting to get into property and established property investors alike. You can see the full video above. In this article, I will summarise the 3 big benefits of bridge-to-let financing.
1. The lender tells you the likely end value
Often people find it challenging to get started on a BRRR project without knowing what the end value will be. While you can try and work out the end value by looking at comparable properties in the area and understanding the market, you can never be certain of what a lender will think at the end of the process. There is therefore always an element of risk when you take on this type of project.
With a bridge-to-let loan the lender will tell you what they intend to value the property at once the work is done. This gives you a much higher degree of certainty and minimises your risk. Having a lender say what the likely end value will be allows you to plan ahead and focus on ensuring the refurbishment is up to spec.
2. You can use a borrowed deposit
When you buy a normal buy-to-let property you need a deposit. That deposit cannot be borrowed from someone else. This means that it is a lot harder to save up and buy a property. When you buy a bridge-to-let, you start off on a bridging loan. You can normally use any lawful source for a deposit on a bridging loan.
This means that you can borrow the amount of money you need to buy the property from a friend or family member, for example. This allows you to get started investing in property a lot quicker than you could for a normal buy-to-let investment.
3. You can recycle your cash again and again
As with a regular BRRR deal, it is possible to recycle your cash. When the property is moved over to a buy-to-let mortgage, it will refinance at the new value of the home. This means if the new value of the property allows you to get a mortgage for the same or more than you spent (i.e. the bridging loan, your deposit and the refurbishment costs), you essentially get your money back in the form of a mortgage. You can then use that cash to do the whole process again and again!