Bridging loans and social housing investments

Social housing and HMO investments offer a compelling alternative to regular residential property investment. These types of property offer the potential for stable returns, long-term leases, and the opportunity to contribute positively to society. However, securing traditional financing for social housing projects can be a time-consuming and challenging process. These factors often reduce the viability of these investments for many investors. Fortunately, bridging loans are an excellent solution. Bridging finance is flexible, can be acquired quickly and can be tailored to meet the requirements of each situation.

Advantages of social housing investments and HMOs

Stable and long-term income

Social housing properties are typically leased to individuals or families who rely on government assistance for a variety of reasons. These types of properties typically have a low turnover of tenants and are financially supported by the government. This translates to a reliable and predictable income stream for investors. In comparison to the potentially volatile fluctuations experienced in other sectors of the property market.

Lower maintenance and management costs

Typically, there are no service charges or management fees with social housing to take a piece out of ROI. The housing operator (typically the local council or housing association) will take care of property management. This usually involves everything from collecting rent, maintenance issues and any other rental management tasks. Consequently, investors can be less involved in property management whilst knowing their property is being properly maintained.

Long-term leases

Social housing leases are often longer than those in the traditional rental market, typically ranging from 3-5 years or even longer. This longer lease period provides investors with greater stability and peace of mind regarding their investment. Not bringing in new tenants every 12 months (as common with a private rental) also reduces paperwork and related fees.

Tax incentives

The government is encouraging private investment in social housing, with subsidies and tax incentives available to landlords. Furthermore, a strong demand for social housing ensures a reliable stream of long-term leases and low tenant turnover. As a result, income is regular and predictable.

Societal impact

By investing in social housing, investors can contribute to society by providing safe and affordable housing options for vulnerable people. This allows investors to align their financial goals and have a positive impact on the community.

Portfolio diversification

All investors know that diversification is crucial to reducing portfolio risk. As a low-risk investment, social housing further reduces the overall risk exposure of a portfolio. Coupled with the lower maintenance and management costs, social housing can deliver excellent ROI whilst also being a lower-risk investment.

Challenges of HMO and social housing investment

Securing funding

Traditional lenders may be hesitant to finance social housing projects due to perceived risks associated with this specific market segment. This can lead to limited access to conventional mortgage products, hindering the investors’ ability to acquire properties.

Complex application procedures

Securing financing through traditional channels often involves lengthy application processes that can progress painfully slowly. This can significantly delay the acquisition process, reduce ROI and potentially cause investors to miss out on attractive opportunities altogether.

How Alternative Bridging Loans Can Help

Alternative Bridging addresses these challenges by offering property finance that is ideally suited for HMOs and social housing. Our Residential Bridging Loans are perfectly structured for investing in HMOs and other residential properties. We also offer Light Refurbishment Loans for property refurbishments costing over £250,000 without requiring planning permission. Furthermore, for more structural reconfiguration and substantial rebuilds, our Heavy Refurbishment Loans are ideal. These loans are available from £500,000 to £3.5m and are excellent for converting a residential property into an HMO.

Bridging the funding gap

Bridging loans can be used to bridge the gap between the purchase of the property and the long-term financing. This enables investors to complete the purchase and begin generating rental income without waiting for a mortgage.

Speed and flexibility

Unlike traditional mortgages, Residential Bridging Loans boast a significantly faster application and approval process. We have some of the fastest turnaround times in the industry and our BDMs are experts at tailoring the perfect solution for your clients. This allows investors to act quickly on promising opportunities and avoid missing out due to lengthy financing delays.

Tailored solutions

Bridging loans can be structured to meet the specific needs of each project. With flexible terms and loan-to-value ratios that may not be readily available with traditional lenders. This allows investors to capitalise on unique property characteristics and optimise their financing strategy.

Let us help you acquire the finance you need

We offer a wide range of loans that are structured to be ideal for investing in HMOs and social housing. If you have any questions about obtaining property finance for your clients, give our experienced BDMs a call on 020 8349 5190. Alternatively, send us a message with your queries.