A great deal, but cash tied up

THE QUESTION

I viewed a property last week and negotiated from £85k to £73k, but unfortunately my funds are tied up in another deal.  HOW ANNOYING!

I was wondering if there is another way to fund this as would be ideal for the list of tenant buyers that I have.

THE ANSWER

Certainly there is another way to fund this - bridging finance.  

This is one of the aspects of bridging that I teach to investors, what I like to call 'no hard cash down' funding.

Let’s just say your cash is tied up in a property you bought for £100k.  Now you could get this second property for £73k, but you can’t do it because all your £100k cash is tied up in the first property.  So here's where bridging comes into its own

A bridger would give you one loan over both your first and second properties, often up to 75% of each property, but you won’t need to borrow that much.  They would typically lend 75% of the £73k and the balance of deposit, interest for the term of the loan and even refurb costs (if needed) can all be funded from the equity in your first property.

So there you have how to do a no hard cash down deal.  Your only cash needed is valuation and legal fees.

You can take this a stage further too.  Let’s say you bought your first property for £100k, spent £20k improving it and it was now worth £150k.  You can bridge up to 75% of the £150k. This gives you even more leverage to buy more properties.

Most investors think just like you do.  ‘My cash is tied up in a property, therefore I can’t buy and more until I get a mortgage on the first property to get my cash back out.’

A bit of lateral and smarter thinking proves that not to be the case.

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