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Bridging Loans Prove Popular for House Flipping Developers

Contributed by Craig Upton
September 24, 2021

Investors looking to generate short-term returns keep turning to bridging loans to fund house flipping projects; as property prices continue to skyrocket across the UK, investors are leveraging sky-high demand by using short-term loans to renovate, refurbish and resell homes quickly.

"We've seen a rise in these types of customers approaching us for bridging finance to refurbish properties during the last year, as they take advantage of rising prices and a red-hot property market," commented Sundeep Patel, director of sales at Together.

He went on to say that his company has seen a major spike in demand and customers looking to "quickly buy, refurbish and then sell on" properties to cash buyers, typically within periods of six to 12 months.

Average property prices across the UK have increased by around 11% compared to this time last year, reaching a new all-time record high of GBP 248,857.

Alterations to regulations on property developments have enabled investors to set their sights on a broader range of non-residential properties, which can subsequently be converted into residential homes by ensuring they meet the minimum specified criteria.

According to Mr. Patel, the alteration has "streamlined the planning process, making it easier for them to be developed into modern homes for people to live in." In response, more investors are seeking short-term bridging finance to cover the costs of their expedited property purchases, renovations and sales.

A Golden Opportunity for Investors

Speaking on behalf of Crystal Specialist Finance, managing director Jo Breedan said that investors currently have the potential to make generous returns by converting non-residential properties into homes.

"In terms of floor space coverage, a commercial residence is typically about 30 per cent smaller than its residential equivalent. So [investors are] getting a discount there anyway," Jo said.

"They get the planning permission, do the conversion and these guys are making a 20 per cent profit in that sort of transaction."

Mr. Breedan also acknowledged the potential for a major slowdown over the coming months, but rather than attributing it to the conclusion of the stamp duty holiday said it would come as a result of "people needing a break and trepidation about whether we're going to be in another lockdown by the end of the year".

Elsewhere, owner and director of LDNfinance, Chris Oatway said that his company was already seeing a slowdown in demand from house-flipping investors.

"Buy, develop and hold is the standard process now and only certain assets where exceptional profit levels have been hit result in the asset being sold," he said.

"The stamp duty holiday reduced the costs of buying which may have encouraged investors to flip, but from what we have seen this has also meant there is more equity in the project which allows them to keep them in their portfolio and still be able to move on to another project." Find out more about property finance products at UK Property Finance.

Craig Upton supports UK businesses by increasing sales growth using various revenue streams online. Creating strategic partnerships and keen focus to detail, Craig equips websites with the right tools to increase traffic. Craig is also the CEO of iCONQUER, a UK based SEO firm and has been working in the digital marketing arena for over a decade. A trusted SEO consultant and trainer, Craig has worked with British brands such as, DJKit, UK Property Finance, Serimax and also supported UK doctors, solicitors, builders, jewellers, to mention a few, gain more exposure online. Craig has gained a wealth of knowledge within the digital marketing space and is committed to creating new opportunities working with UK companies.


Tags: United Kingdom | Banks/Financial | Banking | Banks | Real Estate | United Kingdom (UK) | real-estate investment | banking | real-estate



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