Case Study - Going Once, Going Twice, Funded! An Auction Purchase Case Study

This case study demonstrates how bridging finance helped transform a run-down auction property purchase into modern, well-presented buy-to-let property. It is a great example of how investors can acquire a property that mortgage lenders would not consider suitable and turn it into a reliable income producing asset.

The Challenge
Our clients, Ellie & Jake, spotted a run-down residential property at auction that needed a lot of love. It had everything from trees growing inside, to major damp issues and so a standard mortgage was not an option. Still, the location, price and potential made it an exciting opportunity.

They secured the property for £168,000 (which was slightly over the guide price) and, as with most auction transactions, they had to complete within a 28-day deadline.

Not only did they require the funds to buy the property, but they also needed money for some of the refurbishments.

The Solution: Bridging Finance
We put together a tailored bridging loan solution that committed to lend in the timescales required and on a property in its current condition.

Fast completion: Everything was approved and wrapped up within the auction timeframe

Flexible approach: The lender focused on what the property could be worth after the work, not just its current state

Refurbishment funding included: The loan covered some of the renovation costs

Interest roll-up: No monthly payments during the refurbishment helped focussed spend onthe project

This enabled the clients to secure a bargain property, have the funds to transform it and have it available to rent as quickly as possible.

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The Exit Strategy: Buy-to-Let Refinance
As soon as the refurbishment was nearing completion, the property was revalued at a significantly higher figure, reflecting the improvements made and the fact it was now habitable.

We then arranged a buy-to-let mortgage based on the new market value, projected rental income and the borrowers’ long-term investment strategy.

This refinance allows the clients to repay the bridging loan in full and release equity from the uplifted value to replenish their savings.

Conclusion
This project demonstrates how the right funding strategy can turn a distressed property into a profitable long-term investment. The key points to take away are:

·       Bridging finance is a powerful tool for acquiring un-mortgageable properties

·       Speed and flexibility are critical in most property purchases but more so when you buy through an auction

·       Adding value through quality refurbishment can unlock excellent refinancing opportunities

·       A clear budget and strategy are essential from the outset and need to be adhered to

If you are looking to discuss finance options when looking at unusual or auction properties, please do not hesitate to give us a call on 01454 540500 and we would be happy to help.