When purchasing buy to lets, investors in their growth phase often focus on return on investment. By this we mean the returns on money locked into a property.
To increase the return, we want to be pulling as much of our money out as possible. Standard buy to let mortgage restrict us when renovating as they have early repayment charges.
So what we often do is purchase, add value through renovations, then refinance based on the higher value after a few months of bridging. This is what is referred to as the BRRRR method.
This stands for "buy, refurbished, rent, refinance, repeat"
As your mortgaged is based on your end value or GDV, more money is released for future purchases.
Bridging begins in the UK from 0.55%pm/ Where there is work involved on a property though, this begins from 0.64%pm.
Single draw down bridging offers high exposure (80% net & circa 90% gross), but lenders will expect you to have your own funds to renovate the property. This is useful as its reduces asset manager costs
Multiple draw down bridging begins from 70/75% net and can provide the full cost of works in staged arrears. lenders will ask you to fund the first stage yourself though.
For example, if your build cost is 100k, lenders would expect you to spend the first 25k first, then reimburse you the remaining 75k build cost.
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