Facebook-f X-twitter Instagram Linkedin-in
Contact Title
Call any time 0208 143 7779

How Bridging and Development Finance Transformed a Commercial Property

How Bridging and Development Finance Transformed a Commercial Property
In this case study, Auction Finance guided a client through the strategic purchase and transformation of an underused commercial property, which was acquired at auction and developed into a mixed-use space. By utilising bridging finance for the purchase and later transitioning to development finance, the client significantly increased the property’s value and rental yield, attracting both residential and commercial tenants for sustained cash flow and growth.

Objective

The client’s primary objectives included:

1. Purchase

Purchase a commercial property at auction using bridging finance to secure it quickly.

2. Convert the property

Convert the property into a mixed-use development, increasing both its market value and rental yield potential.

3. Exit

Exit the initial loan with development finance to complete the conversion and move to long-term financing for sustained growth.

The Opportunity and Challenges

The client identified a vacant commercial property located in a high-demand area where residential space was increasingly sought after. The conversion into a mixed-use property provided a unique opportunity to optimise rental income by introducing both residential and commercial spaces. However, the project required both bridging finance for rapid acquisition and development finance to complete the conversion.

Key Challenges:

Auction Purchase Timeline:

Securing a property at auction required completing the purchase within a strict 28-day window, necessitating fast access to bridging finance.

Planning and Permissions:

Converting a commercial property into a mixed-use space required council permissions, zoning adjustments, and careful planning to ensure regulatory compliance.

Financing the Conversion:

Traditional mortgage options did not accommodate the property’s conversion needs, making development finance essential for a successful transformation.

Solution: Auction Finance provided a swift bridging loan to secure the property at auction, followed by a structured development finance package to cover renovation costs and facilitate a seamless transition.

Step-by-Step Strategy and Execution

Step 1 – Securing the Property with a Bridging Loan

The first step involved acquiring the commercial property at auction for £300,000. Auction Finance arranged a short-term bridging loan, enabling the client to act decisively and gain ownership.

  • Purchase Price: £300,000
  • Bridging Loan Amount: £225,000 (75% loan-to-value, or LTV)
  • Interest Rate: 0.8% per month, on a 12-month term
With this immediate funding, the client could secure the property while planning the conversion.
  • Development Costs: £120,000
  • Total Investment So Far: £420,000

Key Renovations and Development Requirements:

  • Zoning Approval and Council Permissions: The conversion from commercial to mixed-use required council approval, which Auction Finance facilitated, ensuring compliance with zoning regulations.
  • Residential Unit Enhancements: Each flat was updated with modern kitchens, bathrooms, and energy-efficient features to attract high-quality tenants.
  • Commercial Space Refurbishment: The ground-floor space was modernised to appeal to small businesses, increasing its market appeal for potential commercial tenants.

Step 3 – Achieving Value Uplift and Transitioning to Long-Term Financing

With the development completed, the client aimed to exit the bridging and development loans by refinancing into a long-term mortgage. The property’s new, appraised value allowed the client to release equity and improve cash flow by covering project costs and securing sustainable financing.

  • Appraised Property Value Post-Development: £600,000
  • Exit Mortgage: £450,000 (75% LTV based on new valuation)

Financial Breakdown:

  • Initial Investment: £420,000 (£300,000 purchase + £120,000 renovation costs)
  • New Mortgage: £450,000 (covering full repayment of the bridging and development loans)
  • Equity Release: £30,000 (allocated to additional fees and property maintenance)
  • Monthly Rental Income: £4,000 (£2,500 from residential units, £1,500 from commercial space)
  • Monthly Profit After Mortgage: With monthly mortgage payments around £1,500, the client now enjoys a monthly cash flow of £2,500.

Why Auction Finance’s Expertise Was Crucial?

Auction Finance’s proficiency in bridging and development finance was instrumental in the project’s success, offering the client tailored funding and expert guidance throughout each phase:

Rapid Bridging Finance:

Auction Finance enabled the client to secure the auction property within the required timeframe, overcoming the 28-day completion deadline.

Structured Development Finance:

Development funding was thoughtfully planned to support each renovation stage, ensuring the project stayed on track without financial bottlenecks.

Seamless Transition to Long-Term Finance:

Auction Finance facilitated a smooth move from short-term to long-term financing, maximising the client’s cash flow potential and unlocking property value.

Key Takeaways for Property Investors

Bridging Finance Supports Fast Property Acquisitions:

For auction purchases, bridging finance provides quick access to capital, enabling investors to secure properties swiftly and competitively.

Development Finance Unlocks Value in Underused Spaces:

Converting commercial spaces into mixed-use properties can significantly increase both property value and rental yield, creating diversified income sources

Strategic Exits Enhance Profitability:

Partnering with Auction Finance helped the client optimise their long-term financing, unlocking equity, and establishing positive cash flow.

This case study highlights how bridging and development finance can transform properties and enable investors to achieve impressive value uplift, increased rental yields, and strong, sustainable returns. For property investors, these financing strategies provide flexibility and support to maximise property potential in today’s dynamic market.

Table of Contents

Recent Posts

Recent Posts

Ready to secure your auction success?

Get in touch today and turn your bids into wins!
Start Your Application
  • Auction Finance specialises in structured financing solutions for property auctions. Our expert team prioritises a client-focused approach, offering competitive rates and flexible options for quick and efficient funding. Whether you're bidding on residential, commercial, or land, we are committed to supporting your auction success.

Quick Links

Our Services
Follow Us
Facebook-f X-twitter Instagram Linkedin-in
  • THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.
  • YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
  • We are a credit broker not a lender.
  • The FCA does not regulate most Buy to Let mortgages.
  • Authorised and regulated by the Financial Conduct Authority FCA reg. 994617.
  • 5 Century Court, Tolpits Lane, Watford, WD18 9PX. Registered in England, No 14667048
  • We always aim to provide a high-quality service to our customers. However, if you encounter any problems and we are unable to resolve them, you can take your complaint to an independent ombudsman. Our advice is covered under the Financial Ombudsman Service.

(C) 2025 Auction Finance is a trading name of Mortgage Knight Ltd

Start Your Application Now