Buy-to-let property investor in Twickenham uses auction finance

Finance: £70,000 | Location: Twickenham

An experienced property investor with over a decade of successful operations in the Private Rental Sector (PRS) sought to expand their buy-to-let (BTL) portfolio, in the property market of Twickenham.

Possessing a solid track record and managing a portfolio of over nine properties, this seasoned investor identified a promising opportunity at a property auction and required a short-term bridging finance solution of £70,000.

Purpose-built flats in Twickenham

Unlocking potential in a second-floor two-bedroom flat with auction finance

The target property, a second-floor two-bedroom flat within a purpose-built building, presented an attractive prospect for the investor's portfolio expansion. The flat featured a reception room, two bedrooms, a kitchen, and a family bathroom. Additionally, it came with the added benefits of a parking space and a balcony. 

Recognising the potential value through refurbishment and the high demand within this area, the investor set their sights on the auction property. Auction properties typically sell for 25% less than market value in London. 

With a keen eye for opportunities, the investor chose to use auction finance to complete the property purchase as the property required a leasehold extension, and the upfront investment fell short. The short-term finance would allow the investor to purchase the property within the short time frame, make necessary refurbishments and also extend the leasehold on the property (which was at 73 years). The leasehold extension alone potentially costs upwards of £7,000 to extend a lease by 90 years. 

The decision was driven by the need for flexible financing, a common requirement in auction environments (payment must be made within 28 days), and the fact that the investor was unable to mortgage the property due to the short leasehold.

Twickenham - a hotspot for property investment

Twickenham continues as a promising hotspot for property investment, contributing to its attractiveness:

Increased demand for rental properties: The demand for rental accommodation in this area is driven by factors such as its proximity to central London, including parks and cultural attractions. The presence of educational institutions in the area adds to its appeal for families (5 schools rated ‘Outstanding) making it a desirable location for those prioritising education for their children.

Transport links: Twickenham is well-connected by train, with its own railway station providing direct services to London Waterloo in as little as 30 minutes. This offers a convenient commute for residents working in central London. The area is well-served by major road networks, including the A316 and the M3, facilitating easy access to the city and surrounding areas. 

Capital appreciation: The potential for capital appreciation in Twickenham is evident through a significant upswing in the average sale prices over the past five years. During this period, the value of flats in Twickenham has surged from £469,808 to £495,388, marking a noteworthy increase of 5.4%.

Quick financial solutions and a clear exit

The property had an estimated value of £120,000, and with an upfront investment of £57,000 towards the property purchase, fees, SDLT tax, leasehold extension, and refurbishment, the total/gross bridge finance requirement was £70,000; equating to a loan-to-value (LTV) ratio of 60%.

The investor had a clear exit strategy in place, intending to fund the loan repayment through the sale of another property that was unable to meet Energy Performance Certificate (EPC) standards.

Continued investment in Twickenham's competitive property market

The success of this venture not only added another property to the investor's property portfolio but also underscored the importance of financial agility. This success was in no small part due to the ease of access to bridging finance.

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