Buying a Property That isn’t Acceptable to a Lender

When it comes to real estate, high-net-worth individuals often like to push the boundaries. And why not? Opportunities are aplenty, and for anyone with the right vision, returns on investment can be lucrative. However, this also means your clients will be interested in real estate that’s often not acceptable to mainstream lenders: property with complex titles, renovating derelict buildings, property with a short leasehold…the scenarios are nearly endless.

The heart of the problem is that lenders generally want to lend against ‘safe’ property. What constitutes ‘safe’ is broad and will depend on each institution, but generally means low-risk and easy to sell. Typically, lenders like to see roofs, kitchens, running water, lots of years left on a leasehold, standard construction, no restrictive covenants, no complex titles…and so on.

In other words, property that’s unacceptable to a lender is very often exactly what your clients want to buy. These properties can have immense potential and may not be suited to other buyers, and it can be possible to benefit from great deals.

But when your client’s property is unacceptable to a lender (whatever the reason), nothing will change that decision. It’s improbable but surprisingly easy to end up with a client with a net worth of £75 million who can’t finance a property valued at £3 million. Often, it’ll be down to you to find a fast fix.

Bridging Finance for Property That’s Unacceptable to a Lender

The underwriting process for bridging finance is completely different from other types of lending and you will often find they will be able to finance these types of purchase with a bridging loan.

Where traditional property lenders focus the underwriting process on the property at the centre of the deal, bridging finance allows for a little more flexibility. The property and the value of the real estate in question is, of course, always a consideration. But lenders can also evaluate risk on other elements of the deal.

Here at Tenn, to lend, we need one of two things: a great borrower or a great property. If your client has a fantastic profile and solid finances, we can usually lend, even if the property would be unacceptable to any other creditor. Bridging finance is a short-term financing solution, lasting between a few months and up to three years.

Suppose the physical structure or status of the property was what made other types of lending a no-go. In these cases, a bridging loan will give your client enough time to develop the property, fix issues, build, or convert the real estate before refinancing to a new lender once the property is ‘acceptable’. If the property was viewed by lenders as unsuitable or overly complex from a legal perspective (i.e., complex title or ownership structure), your client can take ownership of the property and then have time to look at longer-term financing options, usually with a specialist lender who can cater to these scenarios or by paying back the loan through a liquidity event or selling the property.

Bridging Finance for Properties with Complex Titles and Ownership Structures

For many lenders, unacceptable properties and complex deals can be one and the same – not for Tenn.

Many lenders shy away from complex deals because they are too challenging to navigate: underwriting takes too long, the lender can’t cater to how your client wants the deal structured, or the lender doesn’t have the expertise to support these deals. Many deals aren’t acceptable to a lender, not because there is something inherently wrong with the property but because the transaction is simply too complex for the lender to contend with.

What constitutes ‘complex’ in other parts of the market will not be true for Tenn, and we are happy to consider borrowers who can’t get finance from other lenders. For the right borrower, we can create financing solutions for properties or situations that are unworkable in any other part of the market.

Contact Us

If you have a client that wants to buy property that’s unacceptable to a lender and you would be interested in exploring bridging finance as a solution, drop us a note. We’ll be in touch to explain more about how we work and chat about how we can help your client.