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Successful residential property flip in Maidstone Overcoming challenges with a bridge loan Maidstone - a good choice for potential property investors Ideal investment opportunity for experienced investors Bridging finance required for refurbishment Maximising returns through refurbishment and establishing an exit strategy Building a sustainable income stream through annual investmentsSuccessful residential property flip in Maidstone
A husband and wife team who have been actively involved in buying and flipping properties for around 10 years, in and around their home county of Kent, required financing to facilitate their next property flip.
Their objective was to purchase a residential investment property located in Maidstone, refurbish it, and sell it to generate profits. To achieve this goal, they required short-term property finance in the form of a £90,000 bridge loan.
Overcoming challenges with a bridge loan
Our clients encountered a challenge with an existing property flip that was awaiting completion before they could use those profits for this new property investment.
Developing multiple projects is a typical approach that experienced property investors take to make bigger gains in shorter time frames, but the approach often requires needing to raise additional finance - which is exactly this client's situation. With the anticipated two-month duration for the refurb works, a property refurbishment bridging loan was considered the most appropriate short-term financing solution.
Maidstone - a good choice for potential property investors
Maidstone, located in Kent's beautiful countryside, offers numerous attractions for property buyers. The town has excellent transport links, with access to London just shy of an hour by train and under two hours by car, making it an ideal commuting location for professionals seeking a quieter lifestyle outside the city.
The North Maidstone districts, including Invicta Park, Penenden Heath, and Ringlestone, are considered good-value investment areas with convenient access to the M20 and the town centre.
According to a study conducted by solicitors Bird and Co., Maidstone has attracted more Londoners than any other location in Kent, and in 2021, was the second most sought-after town in the UK.
Mainstone presents the opportunity to benefit from strong capital growth, with an overall average property price of £349,030, increasing 11.2% over the two years to August.
However, the main driver of rising prices is the persistent imbalance between high demand and low housing supply. This indicates the town's potential for continued growth in the short to medium term.
Other factors, such as a vibrant night economy and 18 'Outstanding' Ofsted-rated schools, also contribute to the growing popularity of Maidstone amongst young professionals and families looking to buy property in a location close to London but missing the London price tag - factors that indicate a potential opportunity to property flippers.
The town's wide market appeal, particularly to families and commuters, is bolstered by its countryside location and excellent transport links.
Ideal investment opportunity for experienced investors
The proposed property investment was a three-bedroom, two-bathroom, semi-detached house built in the 1980s, with two good-sized reception rooms, separate kitchen facilities, and a utility room on the lower ground floor level.
One of the en-suite bedrooms on the ground floor makes the property well-suited for various prospective buyers. This could appeal to a couple looking to live together with a parent utilising the space as a granny annexe, a young professional buyer considering renting out the third bedroom for extra income, or a family in need of additional living space.
The large garden contained a triple garage with rear access to the property, offering additional possibilities for development.
Bridging finance required for refurbishment
Although structurally sound, significant refurbishments were required before the property could be sold at its optimal price range. This included:
- A new modern kitchen installed
- Two new bathrooms installed
- Redecoration throughout the three bedrooms and two reception rooms
To finance these refurbishments while not compromising ongoing projects or cash flow availability from previously held investments temporarily tied up, the couple required a bridge loan of £90,000 with a Loan-to-Value (LTV) ratio of just a little over 33%.
Maximising returns through refurbishment and establishing an exit strategy
The open market value of the property before refurbishment was £270,000. The client had £190,000 towards the property purchase, fees, and SDLT tax, with an additional £30,000 budget for the light refurbishment of the property. The client sought a bridging loan for the £90,000 shortfall. With the potential of reselling the property at £410,000 after the refurbishment, offering a healthy gross profit of £110,000.
As this property was a corner plot with two garages accessible via an adjacent road, there was also the potential of developing the garage into a small 2-bedroom chalet. However, the investors felt that they didn't have the experience to also manage the development and that it would potentially risk their ability to quickly sell the house and move on to their next project. Instead, this opportunity was positioned as an additional benefit when marketing the property.
The exit strategy for this project was a straightforward sale post-refurbishment to quickly release the profit from their investment.
Building a sustainable income stream through annual investments
The ultimate long-term goal for this investor duo is to flip between two and six properties annually whilst building a sustainable six-figure annual income.
Each successful investment builds investor confidence, but more importantly, re-investable equity for future projects, enabling clients to take on larger, more lucrative opportunities.
