A business model used by many buy to let landlords is to purchase rundown property at low prices in property auctions, then refurbishing for rental with a short a turnarounds as possible. Because of stricter affordability rules, some larger landlords are finding it more difficult to obtain finance for their property purchases. A typical way to finance auction deals is to use a bridging loan to complete the purchase before the 28-day deadline for payment after winning bids, and then obtain more long-term finance. This can be remortgaging other property or getting a new buy to let mortgage. In the past most high street lenders provided finance, but stricter underwriting rules have made it harder to get loans. The alternative is to approach a broker. A good broker will arrange the initial bridging loan to complete the purchase, and then find a specialist lender for more long-term finance. If the landlords can show that they have experience of trading profitably and have a valuable property portfolio, they should be able to get a loan. Sometimes property at auction is sold at a low price because it is classed as uninhabitable and not eligible for a mortgage. A broker can arrange bridging finance for the building work need to make the property mortgageable. Though being a landlord is more difficult than it once was because of more legislation and extra costs, purchasing homes at auctions and refurbishing them for tenants can still be a profitable way to obtain good returns.
May 10, 2022
