Investing

Spursman100 · 11 May 2018 at 12:57PM

Bridging finance
Bridging loans are short-term loans used by property buyers who are expecting to get a mortgage from the bank but cannot wait for the approval. For example, a landlord might need to convert or refurbish a property for the rental market, but would not qualify for buy-to-let finance until after the work is done. As a private investor, you can invest in funds that pool bridging loans, in order to spread the risk across several borrowers. It’s a well established business, but the minimum investment in these funds is typically around £25,000.

Has anyone got any experience with this?

I am looking to either sell my property that I own with my brother or buy him out by remortgaging and renting it. option 2 is to sell and use the money and invest in bridging.

I will have 85k to invest if I sell the property

thoughts?

lisyloo · 11 May 2018 at 1:01PM

Is the investment secured on property?
Is it covered by the FSCS or any other compensation scheme?

If not then you could lose the lot.
Personally I'd rather have a diversified portfolio of funds as it spreads the risk.

El_Torro · 11 May 2018 at 1:21PM

Looks like a form of peer to peer lending. Might give good returns but I wouldn't put too much of my investible wealth into it, certainly not more than 10%.

Spursman100 · 11 May 2018 at 1:43PM

lisyloo wrote: »

Is the investment secured on property?
Is it covered by the FSCS or any other compensation scheme?

If not then you could lose the lot.
Personally I'd rather have a diversified portfolio of funds as it spreads the risk.

Yes its secured against the property. Only downside is if the person defaults you have to wait for your money.

not sure what compensation scheme covers it, need to look into it more.

ChesterDog · 11 May 2018 at 3:05PM

I have three such investments currently.

All three are in default.

Malthusian · 11 May 2018 at 3:09PM

Who is the borrower you are lending to, or the company arranging the bridging loan investment?

ChesterDog · 11 May 2018 at 3:20PM

Malthusian wrote: »

Who is the borrower you are lending to, or the company arranging the bridging loan investment?

In my case, it's three borrowers via House Crowd.

I don't generally touch these sorts of third party loans in that format, but sometimes there is a bit of a drought of the conventional buy-to-let investments.

Broken_Biscuits · 11 May 2018 at 3:27PM

If you have not already found it, try reading here http://www.p2pindependentforum.com

Yes the loans are often asset backed, but there is often a question mark over the valuations given.

Lendy used to be the people!!!8217;s favourite but has fallen out of favour recently with a few defaults and bad valuations. Up until very recently collateral was very popular but a freeze on all accounts and going into administation put an end to that. Is moneything the new darling now?

If you do your research and still want to invest it would be bad investing to put 85k in if that is your only investments. You would think that 85k in p2p would be ok if you had a total of 400k to 1mil invested across other investments. Eggs in baskets and all that.

Personally I have at times had a few thousand in p2p but not so much currently. I was in the process of winding down when the collateral admin thing happened so am locked in until that gets resolved but have not had any defaults from them or any other platform. I think I might be one of the lucky few in that respect, where the strategy known as pass the parcel did work for me.

Lots of risk associated with bridging or p2p and not really suitable for all your savings.

Best Of luck though if you do decide to put some of your money in

Spursman100 · 14 May 2018 at 1:40PM

Thanks for the replies, it was mentioned to me and I don't have enough time to educate myself on it. I think I will rent out my property as that seems as safer bet. Just hope I can get decent tenants in.

bowlhead99 · 14 May 2018 at 2:01PM

Spursman100 wrote: »

Thanks for the replies, it was mentioned to me and I don't have enough time to educate myself on it. I think I will rent out my property as that seems as safer bet. Just hope I can get decent tenants in.

Plenty of info on tenancies etc on GM's thread as a starter here.

https://forums.moneysavingexpert.com/showthread.php?t=5180214

There are several threads on different aspects of landlording that you'll find within the house buying/renting/selling board. Don't stop until you've read every link on every link on every post.

Being a landlord isn't without its responsibilities -it can be a minefield to those who aren't educated on property law and good business practices. So if you don't have plenty of time to educate yourself on stuff, don't be too quick to set up a small single-property letting business as a landlord. A smarter use of your funds can be to invest into other people's investment products.

Lending at high interest rates for bridge finance on a property development that might fall through due to a declining property market or incompetence of the borrower, and hoping the borrower doesn't go bust, is one sort of thing that could be found under "other people's investment products" but it's by no means the only one, nor the safest if you're looking for a home for your cash.

jamei305 · 14 May 2018 at 2:22PM

Bridging loans that are solely to facilitate a house move, where someone needs to buy a property before selling their current one are a well-established product offered by banks. John and Norma Major used one to buy their constituency house in Huntingdonshire for example.

Where they are used for property development they tend to be a lot more risky, because there is far more uncertainty over the valuations of property developments than established family homes.

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