Closed Bridging is one of the principal ways property investors use to make money. It is especially useful for people just starting out who don’t have the capital to pay for properties for cash out right. However, it is also used by experienced investors on a regular basis. It is very useful for BMV property deals and can be a way of getting 100% finance loan.So what exactly is closed bridging? And how does it work?Those questions are best answered by giving you an example.Say you want to buy a property without putting any money down say the property is worth £200,000 but you are buying it for £160,000. A broker can apply for an 85% re-loan based on the £200,000 value of the property. (85% = £170,000)On the day of completion you purchase the property for cash for £160,000 using the bridging loan in the morning and then the remortgage goes through in the afternoon for £170,000.This is closed bridging in a nutshell.Deal done and £10,000 in the bank! – Well not quite. There are fees involved.Typically you are looking at between 1% of the cost of the loan or a fixed fee of say around £2000 to the bridging company. Other legal and broker fees might come to another £1000.And if you budget another £2000 for miscellaneous fees.So that’s £5000 off your potential £10,000 profit leaving £5,000. Still not a bad return considering you haven’t had to put any of your own money in the deal.That’s £5,000 to do a refurbishment of the property, to put into your next investment property, or just to pocket and use for that holiday to Barbados!That is why in this day and age you don’t actually need money to be a property investor. As long as you can find properties that are enough BMV and you have an o.k. credit history (even that is not a major issue sometimes) then you should be able to do the deal.This way of doing things is preferable to most investors than putting down deposits from their own capital and remortgaging sometime later.Closed Bridging allows you to do no money down deals effectively and with confidence. As long as you have truly bought the property well enough below market value (Normally we actually aim for at least 18% upwards) then you should be onto a winner.If the property needs a lot of work doing to it then you can factor in these costs as well. **Nothing on this website should be confused with financial or legal advice. If you need this, or any other type of advice, please seek the help of a competent professional. In addition, because real estate laws change all the time and differ from state to state, and even city to city in the same state, everything in these pages should be considered general marketing advice and ideas. Please see link to full Disclaimer at the bottom of this page.
