Bridging Loans

Have you ever been close to securing a deal but couldn't do it because you had a lack of funds?

Well that happened to me a couple of years back and I didn't have a clue about bridging loans.

I just happened to be in the right place at the right time and was made an offer I couldn't refuse.

I was at a dinner function and was chatting to a drunken guy about his financial problems and how he needed to sell his house within the next month before he got repossessed.

By coincidence I had been toying with the idea of buying a second investment property so when I followed up the lead and met the chap at his house the next day I was astounded at what a great investment the property would be.

It was a big 3 story Victorian property in a popular South Manchester suburb, where all the young professionals seemed to live.

He was willing to sell it for 80% of the true market value for a quick sale so I did some calculations and worked out what the rental income would be for a property of this size.

It was a no brainer. The guy was obviously in big trouble and he needed helping out and of course I was going to make a very healthy profit from it so I went to my mortgage broker and organised a mortgage with haste.

Everything ran smoothly, the surveyor valued the property at the price we needed and I was made a mortgage offer within 2 weeks so this left me 2 more weeks until the poor chap was repossessed.

A week passed and my solicitor said there had been a slight problem with the searches and it would probably take another week or 2 to sort out.

I had to inform the poor man so that he could find an alternative buyer before he was repossessed. Fortunately for him he did, but I missed out on a great deal and somebody else gained because they had the instant cash to buy if fast.

I found out later that I could have organised a bridge loan for a month and saved the deal. Bridging loans tend to cost around 1.5% yet I lost 20% by not getting the deal.

I've also had friends who have missed other types of business deals because they didn't have the instant cash to buy products or materials etc.

Although fairly expensive, bridge loans can save the day and should be one of your first port of calls if you have a great deal on the table that needs instant cash to see it through!

You should always do your homework forst though. The deal must be secure as you don't want a bridging loan around your neck without a deal on the table.