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If you’re planning on financing a buy-to-let or you’re not sure where to get started, the choice of funding you make can make a big difference on your overall cost of the project. Today we’re going to explain what the difference is between angel and bridging finance, so that you can be better informed for any potential projects on the horizon.

What Is Angel Financing?

Angel financing involves seeking financial aid from a private investor rather than opting for a company or bank. The interest rates for this type of investor is likely to be much less than opting for a bridging company, usually around 6-8%. Angel investing is a more ideal form of finance as it involves using someone else’s money, rather than your own. With no private fees to pay or interest on the borrowed amount, you’ll likely to instead be paying a much smaller amount in the long-run compared to using bridging finance. However, the drawback to this type of finance is actually raising the capital. Knowing investors or getting yourself into groups where you can meet investors can be one step to overcome, but creating a pitch for someone to actually trust you with their money can be an issue in itself. One of the first areas to find angel investors should be amongst friends and family. Although this is one of the more convenient ways to find an investor, having a solid plan in place as to how you’re going to spend the investment and playing safe with your investments should be helpful in preventing any kind of family or friend disputes down the road. Anybody you work with in acquiring the property may know of investors, or if you’ve learned about buying to let through a specific peer group then you may be able to meet investors through these kinds of networks. Besides this, there are angel investment networks available online and crowdfunding platforms, but without prior knowledge of the investor, you may need to submit a worthy proposal or be comfortable pitching yourself and your project.

What Is Bridging Finance?

Bridging finance can be acquired through a company specialising in this type of funding. Here at DJF Asset Management, this is something we deal with day-to-day as we help people fund their buy-to-let purchases. As you’re opting to go through a company rather than an individual investor, there are more fees to pay and may in the end sit at around 16%. Bridging is generally aimed at buyers purchasing a property at auction, newer or more inexperienced property developers or even if you’re in the process of buying a new home or selling the one you currently own. If you purchase a property through an auction with the intention of letting it out later, you’ll usually have a very short amount of time to pay for the property – typically around 28 days. You should be able to acquire bridging finance at around 50-70% loan to value, with applications able to be processed within a matter of days – compared to a matter of months with a mortgage. If you’re newer to the property market and you don’t yet know of angel investors, bridging can be a logical choice as it allows you access to fast funds. It’s also one of your only options if the property is un-mortgageable – i.e. if it is not in a liveable condition without a kitchen or bathroom.

Ideally, spreading finance between these two options might give you the best outcome for your project. However, it often requires more experience in the industry as private investors will likely want proof of your previous success. Although some bridging companies may only take into consideration more experienced buyers, being well informed on what property you’re buying, in the area you’re purchasing it and showing you’ve done your research is going to help you when it comes to making a case.

If you’re in need of bridging finance or looking to finance a property deal, make sure to get in touch with us to see how we can help. We’re able to offer finance, which you can get started with by submitting a contact form on our website or emailing us at info@djfam.co.uk. We can also offer expertise and investment opportunities that provide solid returns thanks to our rigorous and thorough procedures.