How bridging loans can help to purchase buy-to-let homes

Tuesday, 20 September 2011 05:40

Use a bridging loan to buy homes to rent

Renting out properties that you own to other people can provide you with a significant source of income. But whether you're looking to acquire your first buy-to-let home or have been in the market for some time and are keen to expand your portfolio, a bridging loan can be a useful product to realise your ambitions.

Although many of those taking out bridging loans for the purposes of buying property do so with the intention of living in such homes, they are also a popular option among residential landlords and developers.

The economic crisis of recent years has meant many would-be first-time buyers have struggled to raise the initial deposit required to get on the housing ladder and instead have had to continue to rent where they once may have purchased a property. However, this has created opportunities for investors looking to make their mark on the buy-to-let sector.

As bridging loans are only available to those who have already purchased a home, they are open to real estate owners in order to acquire additional developments to let out quickly and easily. By borrowing against the value of your existing property, applying for a bridging loan can provide a great way to purchase homes to rent out.

Of course, the money you receive upon taking out a bridging loan can be put to much more use than just the acquisition of the property itself.

Depending on how much you take out, you can also use the funds to pay for structural work to your building. This could be particularly useful if you are looking to convert a large development – perhaps a former pub or warehouse – into flats to rent out on an individual basis.

This money can not only be used to pay for materials, but also to hire builders and other tradesmen to ensure this work is carried out to a high standard. By converting a single property into multiple homes, you should have several streams of rental payments coming in, so such a loan could help to deliver a quick return on your investment.

It may also be an idea to update the fixtures and fittings of the property – or properties – that you wish to let out, as well as ensure that it is nicely decorated. Doing so is not only likely to make your rental investment much more desirable among would-be tenants, but may also mean that you can command a high level of rent.

Of course, carrying out such improvements will cost money and while it is likely that you will eventually realise a return on your initial outlay, it is a good idea to take such expenses into account as soon as possible to help you keep on top of your finances.

The use of a bridging loan calculator can be a useful way of doing this and such a tool will enable you to get a rough idea about how much your monthly repayments will be depending on the size of loan you take out and the interest you pay.

If you are hoping to take advantage of the burgeoning buy-to-let market, whether it is for the first time or you have some experience in the sector, you are likely to find that a bridging loan could be just the financial tool you need in order to achieve this.

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