BTL Auction Purchase, Property Needing Renovation

First-time Landlords with a newly established SPV company may face challenges securing a bridging loan for their auction property due to limited experience and tight deadlines. Despite hurdles, we can successfully arrange financing, highlighting options for new companies, accommodating timelines, director/shareholder allowances, and 100% funding for refurbishments.

2/29/20242 min read

The Client

The client are first-time Landlords, but they own their own residential between them. They have a Special Purpose Vehicle (SPV) company recently setup to acquire new investment properties, of which this is their first project. There are 3 directors/shareholders in the SPV company, none of which have any renovation experience.

The Scenario

This scenario has several things to consider:

  1. The fact the property is being purchased at auction means we would have to work to a time constraint of 28 days to complete.

  2. The limited company has just been set up and has there has no history or accounts etc.

  3. Often lenders will only accept an SPV company with a maximum of 2 directors/shareholders.

  4. The clients have no experience in being a landlord and/or renovating properties from auction etc.

  5. This is a light refurbishment with no structural works needed. The clients wish to purchase with the bridging loan and borrow 100% of the money they need for the refurbishment works.

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The Solution

Being a whole-of-market Bridging Loan Broker, we know from experience that not all bridging lenders insist of having previous investment property experience and additionally, the clients having their own residential property is helpful however.

We secured a bridging lender that could complete in the required time frame of 28 days. It was also not a problem for a company to have been newly set up, as it is an SPV and set up for the sole purpose of holding/renting property. The fact the clients had no experience of renovations does cause issues with some lenders, however we know plenty that will allow it as long as they use an experienced contractor.

The bridging loan will typically lend 60 – 70% net on the purchase, but also there are lenders that allow 100% of works to be covered. Most of the time it is released in arrears, which means the client needs the cash for the first stage of works.

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It is possible to get lending on extremely complicated setups, and situations that would seen as undesirable to most lenders.

Key things to consider for Bridging Loans:

  • Some Bridging Lenders will allow new companies.

  • Some Bridging lenders will work to a time frame that works for completion at an auction (typically 28 days).

  • Up to 4 directors/shareholders on a company is acceptable for some lenders.

  • No experience of renovations is ok, as long as an experienced contractor will be used.

  • 100% funding for works is available.

If you have any questions relating to Commercial Finance, contact us today to speak directly with one of our CeMAP certified Mortgage Advisors. Call us today on 0113 8730 740. Alternatively, please complete this short online form and one of our Advisors will call you right back.