Bridging Loan to Fund Simultaneous Property Developments

Bridging Loan to Fund Simultaneous Property Developments

Area
Port Talbot
Capital Raised
£140k

Bridging loans can provide crucial flexibility for property developers managing multiple projects, especially when traditional mortgage options are unavailable due to incomplete constructions. 

The Scenario 

Our clients approached us with a complex situation involving two properties at different stages of development.

Firstly, they owned a semi-detached 3-bedroom house in Port Talbot that was 90% complete, valued at £200,000, with a projected gross development value (GDV) of £300,000 upon completion. However, due to its unfinished state, they were unable to secure a traditional mortgage against it. 

Secondly, an opportunity arose for our client to purchase an additional property - a terraced 3-bedroom house in Rhondda - before their original project was complete. This property, while only worth £50,000 in its current state, had significant potential for high rental yield once renovated. 

The clients needed a bridging loan to accomplish two objectives: 

  • Purchase the new property in Rhondda 

  • Complete the renovations on their existing Port Talbot property 

Their exit strategy involved either renting or selling one or both properties upon completion of the renovations. 

The Solution 

Given the unique circumstances of this case, we knew we needed to find a flexible lender who could accommodate our clients' needs. We approached an unregulated lender known for their willingness to consider cases that fall outside standard criteria. 

We secured a bridging loan of £140,000, with the following terms: 

  • 1% interest rate per month 

  • With interest rolled up to be repaid at the end of the term (to protect the client’s cash flow) 

This solution allowed our clients to move forward with both projects simultaneously, providing the necessary capital to purchase the Rhondda property and complete the Port Talbot renovation. 

The case presented several significant challenges throughout: 

  1. Japanese Knotweed: During the process, issues with Japanese knotweed affected the property valuation. We monitored our client’s treatment plan and kept the lender updated throughout, ensuring they remained comfortable with the strategy. 

  1. Low Property Values: The modest value of the Rhondda property could have deterred many lenders. Our chosen lender was willing to be flexible on this point. 

  1. Credit History: Our clients had a less-than-perfect credit score, which could have been a stumbling block with many lenders. Again, our selected lender was willing to look beyond this issue. 

Final Thoughts 

This case stands out due to the multiple complex issues surrounding the deal. Where other brokers might have resorted to lenders with extremely high interest rates just to get the deal through, we actively sought a middle ground. We negotiated through the challenges of credit scores and valuations with lenders, aiming to secure a favourable interest rate that would typically fall outside the criteria of most lenders' standard offerings. 

Our persistence and expertise in navigating these challenges resulted in a successful outcome for our clients. They were able to move forward with both property projects, potentially setting themselves up for significant returns in the future, whether through rental income or property sales. 

Max Mallinson

Finance Broker CeMAP

Cardiff

0117 332 5977

Are you in a similar situation? I specialise in bridging finance at Clifton Private Finance - I will find you the best funding solution for your property transaction.

Book a free telephone consultation with me at a time to suit you.

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Scott Dutfield

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Cardiff

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Jack Spillane

Finance Broker

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