‘The post-bridging plan’ - Why it’s important that investors think about exit before entry

For those of us in the market, it’s been clear that bridging finance has gone from strength to strength over recent years. Where previously bridging finance was considered strictly for the experienced investor looking for a quick cash injection, it now has multiple use-cases and users. As such we have seen increased demand for bridging driving a competitive environment with new lenders and products entering the market at pace.

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Emma Cox | Shawbrook
4th October 2021
Emma Cox Shawbrook
"Against a backdrop of tenant demand on the up and property values continuing to rise, brokers have a key role to play in supporting their clients"

Against a backdrop of tenant demand on the up and property values continuing to rise, brokers have a key role to play in supporting their clients and advising on why bridging might be a suitable option for them. Savvy property investors and developers should be capitalising on the competitive bridging rates available in order to maximise returns and take advantage of the opportunities on offer. Among its benefits, the flexibility of bridging loans stands out to investors, as a way to leverage their investment at every stage of the property cycle from purchase to refurbishment all the way through to either selling or exiting to a buy to let. This is especially useful as the landscape remains somewhat uncertain as the market and wider economy continues to recover from the effects of the Covid-19 pandemic. Landlords here can take advantage of bridging loans in order to access funds for their next property or to refurbish their current portfolio in order to keep attracting the best tenants and commanding strong rental yields.

However, as much as bridging may provide a fast and specialist solution, a clear exit onto a term option is often overlooked. Brokers can help clients by making sure they are well informed and have a clear exit plan from a bridging product in place, as well as making sure the loan terms are favourable and realistic. This makes it more likely that the client is able to repay the loan at the end of the term and avoid falling into the trap of bridging extensions, which can be expensive; often more so than longer term debt. If setbacks occur or if there is a reliance on the sale of another property, this could risk being delayed and having to take on a bridging extension.

A broker that ensures a bridging term is realistic for their client and provides clear advice to identify the key risk they are taking on will be extremely valuable to investors and will help to make sure the product is fit for purpose. It is also important to keep in mind that bridging is not a one size fits all product. With the choice available in the market, brokers have a real opportunity to structure a deal to achieve the desired outcome for their clients.

As bridging continues to grow in popularity, it is highly beneficial for brokers to make bridging a key part of their toolkit and understand how it may work best for their clients. At Shawbrook we have experience in dealing with complex cases working closely with our valued broker partners to find the best solutions for their clients. Our business is built around the success of our brokers and property investors and as such we remain committed to evolving our product offering to better serve our customers.

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