From Bridge to Term: Refinancing, Releasing Equity and Funding the Next Property Acquisition
For property investors, completing an acquisition or refurbishment is often only one stage of a wider investment strategy.
Once the works are complete, the property is fully let and the new rental income has been established, the asset may be worth considerably more than it was at the outset. At that point, refinancing onto an Onate term loan can provide a longer-term funding solution and may also allow the borrower to release some of the equity created through their asset management strategy.
Using an Onate term loan to refinance existing debt
Onate’s term loan is designed for income-producing residential, mixed-use and commercial investment properties in Ireland.
It can be used to refinance an existing loan approaching maturity, replace short-term bridging finance or restructure debt against a stabilised property portfolio.
The term loan provides borrowers with a longer-term facility aligned with the property’s rental income. Depending on the circumstances of the transaction, it may also include an equity release.
For example, an investor may have acquired a property using bridging finance and a contribution from their own capital. Following completion, they may then have:
Refurbished or repositioned the property;
Improved its energy efficiency and overall condition;
Completed necessary fire-safety or compliance works;
Brought vacant units back into use;
Secured new tenants or longer leases; and
Established a higher and sustainable rental income.
These improvements can increase both the property’s income and its market value. Subject to an updated valuation, satisfactory rental evidence and Onate’s normal credit assessment, the property may support a larger term loan than the amount required simply to repay the existing debt.
The difference may potentially be released to the borrower as equity.
Moving from an Onate bridge to an Onate term loan
Existing Onate bridging borrowers may be able to move directly onto an Onate term loan once their asset management plan has been completed and the property has become a stabilised, income-producing investment.
This creates a clear funding journey:
Acquire or refinance with an Onate bridge → complete the refurbishment and letting strategy → demonstrate the new rental income → obtain an updated valuation → move onto an Onate term loan.
Because Onate is already familiar with the borrower, the property and the original business plan, moving from bridge to term may involve less time, complexity and duplication than refinancing with an entirely new lender.
It can also provide continuity. The same lending team that understood the acquisition and refurbishment strategy can assess the completed investment and structure the longer-term facility around its current performance.
Turning value creation into capital for the next acquisition
A successful refurbishment strategy can create value in two ways.
First, improved accommodation, stronger occupancy and revised rental levels can generate a higher income. Second, the increased and more sustainable income may support a higher property valuation.
Where the updated valuation and rental coverage support it, an Onate term loan may refinance the existing bridge and release a portion of the additional equity created.
That released capital could then be used as all or part of the investor’s equity contribution towards another property acquisition.
For example, if the next acquisition requires a 30% equity contribution, funds released from a completed and stabilised investment could potentially provide some or all of that amount.
This may allow the investor to retain the original income-producing property while recycling capital into the next transaction, rather than having to sell the property to access the value created.
Any equity release will remain subject to the completed works, an updated property valuation, sustainable rental income, the applicable loan-to-value ratio, interest coverage and Onate’s normal underwriting requirements.
A recent €4.9 million Pre ’63 transaction
A recent Onate transaction demonstrates how bridging finance can support an investor from acquisition through refurbishment and, ultimately, into a longer-term funding solution.
An experienced property promoter identified three Pre ’63 residential properties to add to their Dublin portfolio. After encountering challenges with another alternative lender during the due-diligence process, the borrower approached Onate for a fast and certain funding solution.
Onate stepped in and completed the three purchases within just two weeks.
The transaction included a €4.9 million property-acquisition facility, with a further €1 million available to fund the refurbishment works.
Once the refurbishment is complete, the three properties are expected to have a combined value of approximately €9.3 million, representing a projected post-refurbishment loan-to-value ratio of 63%.
The borrower’s strategy is to refurbish and improve the properties before establishing the new rental income across the portfolio. Once the works have been completed and the income has stabilised, the facility is expected to be suitable for Onate’s five-year term loan offering.
This transaction provides a clear example of the bridge-to-term journey:
Acquire the properties → complete the refurbishment works → establish the new rental income → move onto an Onate term loan.
It also demonstrates how an active asset management strategy can create additional value.
Where the completed valuation, sustainable rental income and applicable lending criteria support it, a term loan may refinance the original bridging facility and potentially allow the borrower to release part of the equity created.
That released capital could then be used as all or part of the equity contribution required for another property acquisition, allowing the investor to retain the refurbished, income-producing assets while continuing to grow their portfolio.
A joined-up approach to property investment finance
The ability to move from bridge to term gives property investors flexibility at each stage of a transaction.
Bridging finance can provide the speed and certainty required to acquire a property, refinance existing debt or begin implementing an asset management plan.
Once the refurbishment works have been completed and the rental income has stabilised, an Onate term loan can provide longer-term funding aligned with the performance of the property.
Where sufficient value has been created, the term loan may also provide an equity release. That capital could then support the investor’s next acquisition and help create a repeatable portfolio-growth strategy:
Acquire → improve → stabilise → refinance → reinvest.
If you are considering refinancing an existing property, moving an Onate bridging facility onto a term loan or releasing equity to support your next acquisition, speak with the Onate lending team.
John Ring
Lending Director
john@onate.com | 087 830 5276
Niall Hurson
Lending Director
niall@onate.com | 083 800 0227
Michael Gavin
Lending Director
michael@onate.com | 085 145 4200
Richie McElligott
Lending Director
richie@onate.com | 086 404 5758