Bridging lending, as misunderstood as it is vital
“Bridging loans, that’s one of those things like subprime mortgages and interest only personal loans, right? Boom stuff?”
Wrong. Fundamentally, totally, absolutely wrong.
In fact, it’s one of the most useful facilitators of a functioning housing market.
Let’s look at the situation in Ireland right now; large property funds hold residential properties all over this country. If you’re in an office in Manhattan, you’re unlikely, no matter how hard you try, to be deeply intimate with a housing development in Termonberry, or Termonfeckin or Timoleague. It’s a line on a ledger, a row on a spreadsheet.
But in towns like those all across this country, there are people who know those properties intimately. The local builder, developer or investor. They know the history of the buildings, they know the potential value that could be unlocked, the opportunity to be seized. But they also know all the issues which make that opportunity a tricky proposition to ask a bank to fund.
It might be the wall which was built too far over on a neighbour’s land. The one house out of four which wasn’t finished, the extension that needs to be replaced, the permissions and certifications that need to be completed.
Banks hate those issues. They hate encumbrances. They hate complexities. That’s no criticism of them, it’s just the model for most banks is to systematise and complete in bulk. An opportunity might be wonderful, but if that opportunity comes attached to a deed with issues to be resolved, it rapidly changes from opportunity to obstacle.
Debt Settlement
That’s where we come in. We give the breathing space for obstacles to be removed, complexities unwound. The local investor can go to the Investment Fund that owns the apartments off Main Street and buy them with our support. Then they fix the extension, or move the wall or whatever needs to be done, so they can go to the bank and say ‘it’s clean, simple, unencumbered. Let’s make it happen.’ Bridging.
Equity Release
At Onate, we can give you access to the equity tied up in your existing investment assets. If you don’t have the liquid capital to get started, we bridge that gap. Our loans are structured flexibly, with a term of up to two years, so our borrowers have the option - even the incentive - to repay. After 90 days all our bridging loans can be repaid early without penalty. Neither we nor our clients want bridging finance to be anything other than that. So, if one of our clients is in a position to move to permanent lending earlier than they expected, great.
Social Housing
In some instances, it is more than just our clients who benefit. Take for instance a person who has seen an opportunity in a block of flats that are in disrepair. They know that if it was renovated, the Local Authority could rent it for social housing. That’s not just an opportunity for them, it’s a chance to make a real community impact. But that impact can’t happen until the works are completed and the works can’t be completed unless someone will fund them. Onate can do that. We provide the oil to free the gears of the system; the investor gets to seize an opportunity, the Local Authority gets housing stock, and the people in the community get homes.
We act fast, handle complexity and underwrite with scrupulous attention to detail. And we lend up to 65% loan-to-value for social housing across Ireland, not just those in Dublin.
Residential Auction Purchase
We’re not competing with banks, we’re not a property fund. We’re a bridge. We get investors from here to there. And there’s never been a greater need for what we do. Apart from the properties where local knowledge and expertise can unlock potential, there are hundreds, if not thousands of properties in those ‘vulture fund’ loan books which will come to the market with no issues; ready to go, ready to house a family, or a student. The problems for the people who want to buy them is how they often come to market: auctions. And an auctioneer requires that you put your money where your mouth is; you bid; you buy.
Again, that’s not a situation banks enjoy. So, much of the stock that moves at auction moves to cash buyers. And that intrinsically shrinks the pool of purchasers. That’s where we come in. Our clients can go to auction knowing we are there supporting them, backing them.
When they secure the property, get the tenants established and have the revenues flowing they can take their time and go to the bank with an attractive proposition. One which is clear, simple and easy. Bridging; getting you from here to there. Auction to ownership.
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Good bridging lending requires a few things - the lender has to be fast; if you spot an opportunity you can’t waste time wading through bureaucracy to get finance. The lender has to be flexible; the best opportunities are rarely pretty, and rarely is the next one the same as the last, so you need to be sure your funder can adapt to match your needs. And the lender has to be prudent. You will not be served by a funder who isn’t careful; you need to be sure a deal stacks up and a good bridging lender must be able to tell you when it doesn’t.
That’s what we do. We’re fast, flexible and prudent. And we’re here to help; if you see an opportunity that needs time to make it right. An investment that needs initial cash to acquire, then we are here to provide what the name suggests - the bridge, to get you from here to there.
