Everything has its purpose and so does property bridging finance. This financing method has gained quite a lot of prominence over the years with the real estate industry describing it as a very powerful tool for buyers and investors. It has, in a way, changed the landscape forever and gave acquisitions a new perspective. But when it is best utilized?
#1: Pre-purchase Needs and Acquisition Requirements
Property bridging finance can be used in many ways and perhaps its most popular application happens in the initial stages of a real estate acquisition. Most people would make the mistake of assuming that they only have to worry about the price of the asset as it’s listed on a selling advertisement. Let’s take note that there’s more to every property’s price tag than just its list price.
There are a number of initial or pre-purchase expenses that need to be fulfilled before the transaction is set to roll. For example, one will have to spend some resources in looking for the right assets and coming up with a shortlist of the best ones. Hiring professionals such as lawyers for legal requirements and surveyors for asset examinations will cost some too. Moreover, sellers will require a down payment before anything else and if one needs to buy more time to come up with the cash for that, a security deposit will be made to prevent others from stealing the opportunity right from under one’s nose.
But hey, we’re just getting started. We’ve got two more applications on this list.
#2: Foreclosure Fix
Missing out on installment payments for one’s house, land, building or any other real estate asset will garner a foreclosure. Depending on the agreement signed into by the buyer and seller, a certain number of failed payments will end up in a foreclosed property and nobody wants that. In cases where this is imminent and one has to come up with immediate resources to prevent it, a bridging loan becomes a very powerful and effective tool.
#3: Refurbishing and Renovation Needs
Bridging loans are also fairly used by people in their renovation projects especially when the refurbishing and updates done are in line with a planned sale or lease. Because no buyer or tenant will want a dilapidated or sad looking investment, owners need to raise the bar high and one way to do so is by renovations and upgrades and we all know these projects can rake up serious cash. http://www.alternativebridging.co.uk/development/
Every investor wants to make the most out of their purchases and we don’t see why not. It takes a lot of time, resources and hard work to find the perfect asset for a sweet deal. But we all know how acquiring real estate can be such a taxing job. Luckily, there’s commercial bridging finance that comes to every entrepreneur’s aid.
But what is it and what makes it the perfect weapon of choice? Simply put, commercial bridging finance is a tool that helps investors to acquire their chosen assets faster and more effectively. It provides a short term or temporary loan that fulfills or satisfies short term liquidity needs aka the pre-purchase costs necessary to the transaction pending the availability and/or application of a permanent and often bigger financing (e.g. bank loan, mortgage, and sale proceeds).
Because time is of utmost importance when it comes to real estate and commercial ones for that matter, buyers have to act fast or risk losing the opportunity to another interested party. Remember that the better the asset is, the more heightened the competition becomes. We all want a good deal and anyone will make the move the soonest they can.
The security deposit, the amount paid to the seller as a security that prevents them from selling the asset to someone else for a period of time, is crucial and so is the down payment without which there will be no sale. Let’s not forget about the other pre-purchase expenditures such as the survey costs, research expenses and professional fees to name a few.
These upfront costs are so immediate in nature that many buyers often miss out on an opportunity because they fail to have the money when they need it. But because commercial bridging finance is designed to work for these situations, it is way faster to arrange and does not come with as much fuss in terms of documentary requirements.
Moreover, commercial bridging finance is temporary or short term in nature so it does not pose burdens or risks for a prolonged period of time like its long term counterparts. Plus, providers offer a flexible repayment scheme where users can opt to pay prior to maturity thereby reducing the interests or at maturity which is the date by which one’s main financing has been released and which shall be used in part to close the bridge previously taken out.
In the event that an immediate need comes rearing its head, we’re lucky to have something called bridging finance. But what is it and what benefits does it bring? If you’re new to it, we urge you to read on. This financing medium beloved by the real estate world might just be the lifesaver you’ve been looking for.
A term given to a stop gap measure known for bridging the fund gap brought about by timing obstacles, bridging finance is a short term loan taken out to provide for the immediate short term liquidity needs for asset acquisition transactions. Its popularity and widespread use is due to its number of benefits and below are some of them.
Since time is of the essence in the world of real estate, one has to be fast otherwise someone else might grab the chance before you even get close to it. Since sellers will always require down payment and/or security deposits to be made, this can be challenging for those that have their funds pending. With this financing method, we can eliminate the opportunity losses.
Unlike other types of credit, the use of a bridge provides quite the flexibility. This is because borrowers have two repayment options to choose from and they can favor whichever one suits their needs and capabilities best. As the first option, one may choose to close the loan prior to its maturity or as early as one deems fit and is capable of doing so. The second is where one may opt to repay upon maturity which is oftentimes the day when one’s permanent financing is made available.
Designed to fulfill short term liquidity needs, bridging loans are temporary which makes them less burdensome as compared to other credit options in the market.
Some people choose to finance their acquisitions through credit such as in the form of a mortgage or a bank loan. Others on the other hand opt to sell the current asset they’re using and use those funds to buy a new one that suits their current needs. When that happens, they’ll have to evacuate the current space while waiting for a buyer thus the need to temporarily rent. This creates added cost. By using a bridging finance, buying the new place becomes possible even if the current one is still waiting for a buyer thereby cutting the need to spend on rent.