Funding your first deal. Bridging loans demystified. BTL mortgages. JVs and private investors. When to use which finance product.
I want to tell you about the deal I lost because my bridging wasn’t pre-agreed. Found a 3-bed at auction, 30% below market, perfect cosmetic flip. Couldn’t complete in 28 days. Another investor who had his finance ready bought it and made £34,000.
I didn’t lose £34,000 because I found a bad deal. I lost £34,000 because I wasn’t ready. Finance isn’t something you sort out after you find the deal. It’s something you sort out before you start looking.
This month I’m stripping finance bare. Every deal teardown includes a full finance section — not just the interest rate, but the total cost of the finance including arrangement fees, exit fees, valuation fees, and the actual monthly payments. Because a bridging loan at 0.85% per month sounds cheap until you realise the arrangement fee is 2%, the exit fee is 1.5%, and the valuation costs £750. That “0.85%” just became 6.2% annualised all-in.
I also want to introduce you to the concept of joint ventures — where someone with capital partners with someone with a deal. It’s how most first-time investors actually fund their first project, and nobody teaches it properly because the trainers want you to buy their £24,000 mentoring instead.
This deal only works with bridging finance — and it works well. The property is at auction, which means you need to complete within 28 days. No high-street mortgage can do that. A bridging loan at 70% LTV gives you £87,500 (70% of £125,000), meaning you need £37,500 deposit plus £11,100 in fees (SDLT, legal, arrangement fee, valuation) = £48,600 cash in on day one.
The bridging costs over a 6-month term: arrangement fee 2% (£2,500), monthly interest 0.85% (£1,063 x 6 = £6,375), valuation £450, exit fee 1% (£1,250). Total finance cost: £10,575. That’s the real number — not the headline “0.85%” the lender quotes.
Even with those costs, the deal generates £22,200 profit on £48,600 cash invested = 45.7% ROI over 6 months. The 20% Rule passes at 32% below ARV. This is a strong deal, but ONLY if you have the bridging pre-agreed before auction day.
Mark, the split depends entirely on who’s bringing what. The most common JV structure is: one person brings the capital, the other brings the deal and manages the project. Typical split: 50/50 after all costs. But “after all costs” must be defined in writing BEFORE you start.
What must be in writing: who pays what costs, what happens if the refurb goes over budget (who covers the overrun?), what happens if the property doesn’t sell for the expected price, what happens if one party wants out, and how decisions are made during the project. The JV Heads of Terms template covers all of this.
The thing that kills JVs isn’t bad deals — it’s unclear agreements. I’ve seen friendships destroyed over a £2,000 disagreement about who should pay for an unexpected plumbing repair. Get it in writing. All of it. Before you spend a penny.
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