Short Term Loans For Flipping Houses
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Require a short term loan for flipping a house? We provide:
- Market leading short term loans from £50,000 to £25m
- Rates from 0.5% pm
- Lower rates for £1 million+ loans
- Finance within 7 working days is possible depending on your circumstances
- Bridging loans for auction finance
- Terms from 3 months to 3 years
- LTVs up to 80% (can be more if other assets in the background)
- Interest roll up options
- Residential purchase and refurb (On a regulated basis), buy to let, HMO, investment and commercial properties considered
- Light refurbishment finance (currently uninhabitable, under permitted development rules, require internal refurbishment)
- Heavy refurbishment finance (extensions, basement digs, loft conversions, commercial to residential, barn conversions)
- Bridging finance for business purposes (purchasing land or new premises, deposit for new purchase)
- Alternative assets considered e.g. pension, investment porfolios, fine art, classic cars
- Automated valuation option for properties under £1m
- We provide a friendly, professional service to help you get the money you need at the best available rates
For more information, read our full guide to bridging loans.
Rates from: Downsizing/Upsizing Releasing Funds From Your Home Short-Term Lease Finance Auction Purchase As at 3rd January 2024 Rates from: Light & Heavy Refurb Finance For Unmortgageable Properties Land Purchase with planning As at 3rd January 2024 Rates from: Up to 80% LTV Minimum Loan £500k Minimum net income £100k As at 3rd January 2024 Thank You for your interest - please complete the form below and a member of our team will be in contact.Residential
Buying Before Selling?
0.50% pm
Development & Refurb
Fast Finance
0.50% pm
Residential
Large Bridging Loans
0.50% pm
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Call us on 0117 959 5094 to discuss your requirements.
Written by: Sam O'Neill & Sam Hodgson
What Are Short-Term Loans for Flipping a Property?
Typically, securing development finance from a traditional lender can be a laborious process and can take several weeks or even months before receiving the necessary funding.
A short-term loan or bridging loan is a specialist, fast, short-term financial solution that can be used to finance and refurbish a development property to sell on.
Bridging loans are a popular option for property developers to fund their projects, as they can provide finance within a short period of time to minimise the delay in development.
Bridging loans generally come with the option to ‘roll up’ interest to repay at the end of the term of finance. This is ideal for property developers, as it allows them to avoid monthly interest payments and frees up their finances to spend on their projects.
In this Guide:
What Does it Mean to 'Flip' a Property?
When to Use a Property Development Bridging Loan
First Time Flipping a Property?
What’s a Good ROI for Flipping Houses?
What is the 70% Rule in House Flipping?
How Long Does It Take to Flip a House?
How to Finance a Property Flip
What Does it Mean to 'Flip' a Property?
In basic terms, it is buying a property at a certain price and then adding value through renovation or refurbishment work and then selling the property for a higher price.
Property flipping can be highly profitable when you conduct thorough research and carefully manage your project. But in order to be successful, you’ll need to have a solid understanding of the local market and to develop realistic financial projections before pursuing a flip.
When to Use a Property Development Bridging Loan
Bridging loans can be used to facilitate many different development projects including:
- Extensions
- Conversions
- Structural amendments
- Refurbishments
See our refurbishment loan guide
As a general rule, traditional lenders are reluctant to provide finance for an unmortgageable property. A property is deemed unmortgageable by traditional lenders if the value of the property is below 40K or it does not have a functioning bathroom or kitchen.
Unlike the finance offered by traditional lenders, bridging loans can be secured for the purchase and development of unmortgageable properties, making sure that developers do not lose out on attractive "flip" opportunities.
Use our Bridging Loan Calculator
Our bridging calculator can get an approximate idea of what a bridging loan might cost you. But keep in mind that a mortgage broker will be able to fine-tune your expected charges to your circumstances:
Is House Flipping Risky?
Yes, house flipping can be risky, and it's important to understand these risks before entering the market.
Preparation is key when it comes to any kind of development project, and the more familiar you are with what could go wrong, the easier it will be to manage the project successfully.
Here’s what you should be wary of:
Renovation Costs
Underestimating renovation costs is a common risk in house flipping. Unexpected repairs, materials, or labour expenses can quickly erode profit margins or even result in losses.
Time Constraints
In order to minimise costs and maximise your ROI, you’ll need excellent project management skills. Delays in renovations or challenges in selling the property can lead to increased expenses, which can eat into your profits.
Legal Risks
For some projects, you’ll need planning permission, and for properties like Grade-II-listed buildings, there will be additional regulations you’ll need to follow. Failure to comply with local regulations could result in fines, delays, or forced corrections, all of which can impact profitability.
Property Condition
It’s common to find a diamond in the rough that you want to give a new lease of life. In many cases, you can find a great deal (especially if you buy at auction), and your hard work will result in a unique home with twice the value.
But sometimes, you may bite off more than you can chew. Buying distressed properties risks encountering unforeseen structural issues, code violations, or environmental hazards, which can increase renovation costs and lower potential profits.
Is it Your First Time Flipping a Property? Here Are Some Tips
Once you have some development experience under your belt, mitigating the risks we’ve covered will likely be second nature to you.
But here’s what you can do to ensure your first property flip project goes as smoothly as possible:
Do Your Research
Take the time to learn about the property market in your target area, property values, renovation costs, and property regulations set by the local council.
Create a Detailed Plan
Develop a comprehensive business plan outlining your goals, budget, timeline, target market, and exit strategy. Include detailed estimates for renovation costs, holding costs, and potential selling prices to ensure that your project is financially viable.
Find the Right Property
Conduct thorough research to identify potential properties for flipping. Look for distressed or undervalued properties in desirable neighbourhoods with strong market demand. Consider factors such as location, condition, potential renovation costs, and potential resale value when evaluating properties.
Perform Due Diligence
Before purchasing a property, conduct a comprehensive inspection to identify any structural issues, code violations, or other potential problems. Obtain multiple quotes from contractors for renovation costs and carefully review the property's financials to ensure that the numbers add up.
Assemble a Team
Surround yourself with a team of experienced professionals, including real estate agents, contractors, inspectors, and legal advisors. Build relationships with reliable contractors and subcontractors who can help you complete the renovation on time and within budget.
Manage Renovations Carefully
Develop a detailed renovation plan and schedule to guide the renovation process. Communicate regularly with your contractors to ensure work progresses smoothly and according to plan. Monitor expenses closely to avoid cost overruns and delays.
Market the Property Effectively
Work with a real estate agent to develop a marketing strategy to attract potential buyers. Use professional photography, virtual tours, and staging to showcase the property's features and maximize its appeal. Price the property competitively based on market comparables to attract offers quickly.
Be prepared to adapt to unexpected challenges or changes in the market. Have contingency plans in place to address potential setbacks, such as delays in renovations or difficulty selling the property. It’s important to stay proactive and flexible to navigate obstacles and ensure a successful outcome.
One of the primary traps you can fall into as a beginner developer is treating your property flip like a pet project instead of a business investment. When faced with a myriad of choices when refurbishing your property, it can be tempting to lean towards your personal preferences.
This is a cardinal sin when it comes to property development. Your decisions will need to be informed and profit-driven if you want to get the most out of your project. There are some exceptions to the rule, of course, but when you’re just starting out, it’s important to have a buyer in mind.
What’s a Good ROI for Flipping Houses?
A minimum ROI of 10-20% is a good target for house-flipping projects.
Property values and market dynamics can vary significantly across different regions in the UK. Properties in prime locations or areas experiencing gentrification tend to command higher selling prices and offer greater profit potential.
The market can also influence what ROI you can expect. Factors such as supply and demand, interest rates, and economic conditions can influence the profitability of house-flipping projects.
A strong seller's market with high demand and limited inventory may present more lucrative opportunities. It’s also important to know how much it will cost to renovate a property. You can get a bargain at auction across the UK, but significant renovations can outweigh the buying costs.
Here's a breakdown of how ROI is calculated for house flipping:
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Calculate Total Investment: This includes the purchase price of the property, closing costs, renovation costs, financing costs, and any other expenses incurred during the flip.
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Determine Selling Price: Estimate the expected selling price of the renovated property based on market comparables and the property's condition and features.
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Subtract Selling Expenses: Deduct selling expenses such as real estate agent commissions, closing costs, and any other costs associated with selling the property.
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Calculate Net Profit: Subtract the total investment and selling expenses from the selling price to determine the net profit from the flip.
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Calculate ROI: Divide the net profit by the total investment and express the result as a percentage to calculate the ROI.
What is the 70% Rule in House Flipping?
The 70% rule states that you shouldn’t pay more than 70% of the after-repair value (ARV) of a property, minus the estimated repair costs, when purchasing a property for flipping.
Here’s how it works:
The Formula
Maximum Purchase Price = (ARV x 0.7) - Repair Costs
A breakdown
- After-Repair Value (ARV): This is the estimated market value of the property after it has been renovated and is ready to be sold. The ARV is typically determined by analysing comparable sales (comps) of similar properties in the area that have been recently renovated and sold.
- Repair Costs: These are the estimated costs of renovating and repairing the property to meet market standards. Repair costs should include expenses for materials, labour, permits, and any other associated costs with the renovation process.
By adhering to the 70% rule, investors aim to ensure that they have a sufficient margin of safety to cover renovation costs, holding costs, and financing expenses and still achieve a desirable profit margin when selling the property.
How Long Does It Take to Flip a House?
The average property flip typically takes around 6 to 9 months to complete, but this can vary. It’s likely that your first property flip project may take a bit longer, which is where room flexibility on your finance terms may be helpful.
If extensive renovations are required, or if there are delays due to unexpected complications, you can expect the process to take up to 12 months. Similarly, experienced flippers with efficient project management skills may be able to complete flips more quickly, sometimes within a shorter timeframe of 3 to 6 months.
How to Finance a Property Flip in the UK
If you plan on undertaking a property flip, let us take the heavy lifting out of your finance application. At Clifton Private Finance, we have a team of expert financial advisers who can offer you tailored guidance.
Our award-winning bridging team can advise you on the options available to you and connect you with the most suitable lender for your circumstances.
As a whole of market broker, we have relationships with specialist lenders, private banks, family offices and wealth managers. This offers us access to market-leading rates and bespoke finance solutions.
We can find the best deal for your circumstances and are committed to getting results. To see what we can do for you, call us at 0117 332 5232 or book a free consultation below.
FAQs
Yes, a valuation is typically required for a bridging loan in the UK. Since bridging loans are often secured against a property or other valuable assets, lenders will want to assess the market value of the property being used as security. This helps the lender determine how much deposit they want you to provide based on the value and condition of the property. You can borrow up to £25m with bridging finance, but it’s typically capped at about 80% of the value of the property you’re using as security. It's important to note that different lenders have varying policies and criteria regarding the maximum loan amounts they offer for bridging finance. Some lenders have a maximum limit of over £1 million, while others may specialize in smaller loan amounts. Additionally, the terms and conditions of the loan, including interest rates and fees, should also be taken into consideration when determining the overall affordability of the bridging loan. Yes, you typically need a 20-40% deposit for a bridging loan. It can be possible to get a bridging loan without a deposit (a 100% bridging loan), but you’ll need other assets in the background to secure the loan against, and more stringent criteria and higher costs could apply. Yes, it is possible to get a 100% bridging loan (also known as a 100% LTV bridging loan), but it is rare. This means that you won’t need to put down a deposit and can borrow the full value of your property. However, the criteria for these loans can be hard to meet, and you’ll need to provide additional assets as security for your loan. Interest rates and fees can also be higher to compensate. While using bridging finance doesn’t technically make you a cash-buyer, it can allow you to act like one. Mortgages take months to process, often leading to an ‘onward chain’ where all parties involved need to wait for funds to be transferred. Bridging finance can usually be accessed a lot quicker than mortgages so you can bypass the onward chain, giving you an advantage over other buyers and being attractive to sellers. Bridging loans typically have a term of 12 months, but some lenders are willing to stretch their terms to 18 months, or even 2 –3 years depending on the case. Terms longer than 2 years will usually only be considered for specific cases. Yes, you can use a bridging loan to pay Stamp Duty. This amount could be covered by a bridging loan, providing you have a way to repay the additional borrowing amount to your lender. Yes, bridging loans are safe when they’re used in the right circumstances with a solid repayment strategy. However, we recommend speaking to a qualified advisor, like our brokers at Clifton Private Finance, before you take out a product. The main factors to consider with bridging finance are that the full loan amount will usually need to be repaid within a year, and like a mortgage, it is secured against a property as collateral. This means that in the case that you aren’t able to repay your bridging loan, your property would be at risk of repossession. But with a watertight exit strategy, bridging finance can be an efficient way to secure property quickly. Bridging loans are designed to be short-term so there’s no maximum age limit when applying for a bridging loan. This does depend on the lender, as some bridging lenders do have an upper age limit, but there are lenders on the market who offer bridging loans for borrowers aged 70 and over. Bridging loan interest rates usually range between 0.45% - 2% per month, depending on the case and the market rate. Unlike mortgage interest rates, bridging loan interest is calculated monthly instead of yearly. This is because bridging loans are short-term and, in many cases, repaid within a year. Bridging loans can be arranged without early repayment penalties, so interest is calculated monthly to ensure you only pay interest on the months you have the loan for. Unfortunately, mainstream banks in the UK don’t offer bridging loans. This means that if you’re looking for a bridging loan, you won’t be able to get one using a lender you’d find on the high street. There are a variety of specialist lenders that offer bridging loans, but because these lenders are smaller and more niche, you may need a bridging broker to access them. Banks typically charge two main fees when taking out a bridging loan – arrangement fees and interest. But there are other costs to consider such as valuation fees, broker fees and administration fees. Costs can vary from lender to lender, and will also depend on what your bridging loan is for (e.g., residential or commercial purposes.) Arrangement fees are what the lender charges you to take out the loan and can range between 1.5 - 3% of your overall loan. Bridging loan interest, on the other hand, is calculated monthly. This can catch borrowers out who may be expecting an Annual Percentage Rate (APR) like with a mortgage. Yes, you can convert a bridging loan to a mortgage through refinancing, and it is common among borrowers who use bridging finance to buy residential properties. However, whether or not you’ll be able to refinance to a mortgage is dependent on your financial circumstances, the lender, and the property you’re planning to buy. It’s important to be sure that refinancing is a viable repayment option before you take out a bridging loan on a residential property. Yes, bridging loans are typically more expensive than mortgages. Bridging loan interest rates can be much higher than a mortgage, and are calculated and displayed as monthly rates instead of the usual annual percentage rate (APR) that you’ll see on a mortgage. However, bridging loans are a short-term solution, and you’ll only pay interest on the months you’ve borrowed money for – and you can repay early without any charges (for most loans). There are many circumstances where bridging loans are an affordable option and a means to an end - for borrowers that need to finance a property purchase quickly, it may be the only option available. The two most common ways to pay a bridging loan are to sell a property or refinance to a mortgage. You may also need to ‘service’ the loan through the term, which means paying the interest monthly. However, you can opt to ‘roll up’ your bridging interest to be repaid at the end along with the capital. There are also other ways to repay a bridging loan, such as selling a business or even using money from an inheritance. The method in which you pay your bridging loan can be flexible, just as long as it is clear in your application that you have a surefire way to repay your loan when the terms are up. In most cases, a bridging loan will require a minimum deposit of 25%. However, the minimum can vary depending on the lender and the specific circumstances of the loan itself. Generally, bridging loans are secured against a property or other valuable assets, and the deposit required is often expressed as a percentage of the property's value, known as the loan-to-value ratio. In some cases, 0% deposit bridging loans are an option, but only if you have other property or assets in the background to provide additional security. No, typically, you’ll repay a bridging loan in one chunk at the end of the loan term. Bridging loans are a form of short-term finance and will usually need to be repaid within 12 months, but there can be room for flexibility. In some cases, borrowers may be required to make monthly interest payments. This means that each month, you would pay the interest accrued on the loan amount while the principal amount remains outstanding until the end of the loan term. But usually, the interest is "rolled up" or added to the loan balance and paid with the rest of the loan at the end of the term. This option can help protect your cashflow so you can spend it on moving costs or refurbishments, for example. Bridging loans can be arranged in as little as 7 working days. However, it depends on the complexity of the bridge loan and your specific circumstances. It may also be more expensive for you to rush an urgent application through – but not impossible. Bridging loans are a popular option for borrowers who are under time constraints, such as buying a property at auction or breaking a chain. The key factors lenders tend to consider are: Security - Bridging finance is usually secured against property or other valuable assets. Lenders will assess the value and marketability of your security. Exit Strategy - Lenders will want to understand how you plan to repay your bridging loan. In most cases, this is selling your old property, selling the new property (flipping), or refinancing with a long-term mortgage. Loan-to-Value (LTV) Ratio - Lenders consider the loan amount compared to the value of the property being used as security as a percentage. The LTV ratio can vary, but most lenders will have a maximum of 60-80% LTV. Remember, the criteria for obtaining bridging finance in the UK can vary depending on the lender and your circumstances.
Do you need a valuation for a bridging loan?
How much can you borrow with bridging finance?
Do you need a deposit for a bridging loan?
Can I get 100% bridging finance?
Does a bridging loan make you a cash buyer?
What is the longest bridging loan term?
Can I use a bridging loan to pay stamp duty?
Are bridging loans safe?
Can an 80 year old get a bridging loan?
What is the monthly interest rate on a bridging loan?
Do banks still do bridging loans?
How much do banks charge for bridging loans?
Can you turn a bridging loan into a mortgage?
Is a bridging loan more expensive than a mortgage?
How are bridging loans paid?
What is the minimum deposit for a bridging loan?
Do you pay monthly payments on a bridging loan?
How long does it take for a bridging loan to come through?
What is the criteria for bridging finance?
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