In the property market, opportunities often present themselves in unique and time-sensitive ways. One such scenario is the Auction Buy-to-Let (BTL) purchase, where investors can acquire promising properties with the potential for substantial returns.
The Basics:
Location: Essex
Purchase Price: £250,000
Additional Budget: £17,500 (Investor's own funds)
Estimated Gross Development Value (GDV): £300,000
Initial Gross Loan: £162,500
LTV: 65%
Date Built: Circa 1900
Property Description: A charming two-bedroom mid-terrace period house with a rear garden.
The Opportunity: The client identified this property as a prime investment opportunity due to its attractive estimated GDV and potential for refurbishment. With a solid structure and a traditional layout, it represented an ideal candidate for renovation and future rental income.
Challenges Faced: A traditional mortgage was not feasible due to the time-sensitive nature of auction purchases.
Key Steps Taken:
Initial Assessment: We assessed the property's potential value after refurbishment and the investor's overall financial situation to determine the loan terms.
Bridge Approval: The bridging loan was approved, providing the necessary funds to secure the property at auction and cover the initial costs.
Property Refurbishment: With ownership secured, the client can utilise £17,500 of their own funds and the bridging loan for renovation expenses.
Exit Strategy: Simultaneously, the client devised a clear exit strategy, planning to refinance the property once the renovation is complete. The anticipated rental income from the refurbished property is expected to be sufficient to support a Buy-to-Let (BTL) term mortgage.
Results Achieved:
The client successfully acquired the property at auction, thanks to our swift approval and funding.
The property can now be transformed into a desirable rental unit, potentially generating a steady stream of income.
The estimated GDV allows for a significant potential profit margin.
Seizing opportunities like auction purchases requires flexibility and access to rapid financing. This case study demonstrates that a bridging loan can help an investor acquire, renovate, and potentially profit from a promising property.