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matt h

Help me to understand flip financials

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I'm a newbie to property investing and just starting to learn the basics. I'm trying to put together a plan of how to get started, whether to buy a BTL property first or do a flip. I have a question on something mentioned in the course.

The guys said that flipping can be a good strategy to generate lumps of cash quickly, for example to get a deposit in order to fund purchase of a buy-to-let property. However from what I understand a bridging loan can only cover 75% of a property's value, so you're going to need 25% of that available in cash already. In which case it seems the buy-to-let property is going to require you to have less capital upfront. 

Can someone please help me to understand how this works because it seems a bit counterintuitive how you could use flipping to generate cash for a deposit.

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I would also like to raise cash for a BTL deposit by firstly doing a flip. The only feasible way for me to raise the deposit for the flip would be to remortgage my home on a deal with no early repayment charges.

So, I would initially be hit with high monthly repayments while developing the flip property, but this would only be for a few months. Then I could sell the flip property for enough of a profit to pay off some/most of the remortgage and keep some for a BTL deposit. In theory, anyway.

By the way, I got a bridging loan quote from TC Financial Solutions for a maximum of 70% LTV, plus 2% arrangement fee, plus 1% per month, plus 1% exit fee. They can also fund development costs but for a higher rate of interest. I daresay that if you're an experienced flipper with a successful track record you'll get a higher LTV bridging loan.

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