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Maximizing Your Property Investment: Unlocking Opportunities with Short-Term Loans

by | Mar 13, 2024 | Clients, Uncategorised

In January, Karl Griggs presented at the HMO course run by Savoys Properties. As sponsors of Savoys Properties’ 2024 series of events, Karl was pleased to participate in this exclusive educational event to increase the knowledge and skills of property investors. The below article is based on Karl’s presentation at the event.

Short term loans: your gateway to property transformation

In the dynamic world of property investment, seizing opportunities often requires flexibility. Enter Short-Term Loans (STL), commonly known as bridging loans. These financial instruments are your key to covering short-term financing needs for a range of property projects, from purchasing at auction to rapid project turnarounds through refurbishment finance.

STLs are versatile, offering terms from 1 month to 2 years, aligning with the demands of your project. Whether you’re acquiring a property at auction, undertaking refurbishment, bridging a gap in a broken property purchase chain, or diving into development finance, STLs can provide the financial support you need.

Debunking short-term loans myths

Let us start by dispelling common misconceptions surrounding STLs:

  • Myth 1: I don’t need a short-term loan; I can use a buy-to-let mortgage for refurbishments.
    • Reality: You should not do this, because it it will be a breach of your mortgage terms.
  • Myth 2: Short-term loans are too expensive.
    • Reality: Short-term loans have higher interest rates than longer-term mortgages, but they are also only intended to be used for 1-24 months. STLs provide a range of benefits when used correctly.
  • Myth 3: Short-term loans are a last resort.
    • Reality: STLs are a proactive tool, not a last-ditch effort. Many savvy investors choose them for their speed and flexibility as part of well-planned portfolio growth.

For more detail on these myths, read our blog “Short term loan myths: busting the top three misconceptions about short term loans”

Why use short-term loans?

  1. Day one valuation: Confirm the property’s current value and Gross Development Value (GDV) from the start.
  2. Funding on day one: Secure 75-85% funding from day one, speeding up your project.
  3. Works costs: STLs can cover costs on a range of works including heavy refurbishment projects, ensuring progress.
  4. Guaranteed exit: Benefit from a guaranteed exit strategy, providing clarity and confidence in your investment by using the same lender.
  5. Reduced fees on term loans: Enjoy reduced fees when transitioning to a term loan with the same lender.
  6. No exit fees: Unlike some financing options, STLs often come with no exit fees, offering financial flexibility and not tie-ins
  7. Work Permission: STLs allow you to carry out essential works promptly including heavy refurbishment, change of use and planning applications.