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Investors turn their attention to bigger refurbishment projects

Chris Stylianides | London Credit
|
13th July 2021
Chris Stylianides
"Substantial refurbishments can deliver big returns for property investors, but only if they can turn to lenders who understand those projects and the need to deliver the required funding rapidly."

Property investors are very used to the idea of refurbishing a property in order to add value, before either retaining it as a traditional buy-to-let asset or looking to sell it on once more for a profit. The best investors have an eye for properties that lend themselves to a simple refurbishment which could swiftly turn that property into a money spinner.

But we have seen a jump in interest from investors who have found properties where there is an opportunity for a more significant refurbishment. Rather than simply kitting out the property with a new kitchen, or a bathroom, or simply bringing the decor more up to date, investors may recognise that some properties could deliver an even bigger return if they take on a more substantial project, for example by adding an extension or undergoing something like a loft conversion.

First and foremost, increasing the size of a property in this way will increase its attractiveness, since it will become more suitable for a wider range of potential buyers or tenants. This boost to its desirability has the added benefit of raising its value too.

Research by Abbey Lofts earlier this year, based on analysis of Rightmove data, suggested that adding a loft conversion to a property can boost its value by 20-25%, while previous Nationwide Building Society studies have argued that an extension could add 11% to the property’s value. Even a simple conservatory could boost the property’s price by up to 10% according to Savills.

The reality is that the more practical rooms a property has, the more in-demand it will be, and therefore the more money an investor will be able to make from it, whether they are flipping it for a profit or retaining it as a landlord.

Paying for projects

Clearly, there is an excellent case to be made for embarking on a refurbishment project on suitable properties. But ultimately this will all depend on finding appropriate funding for the project, which investors and brokers alike will know can prove far from straightforward.

It’s precisely because of this funding gap that we have launched a new Extend or Convert Refurb product.

This form of bridging finance can cover up to 100% of the works’ cost, with a maximum loan of £3m and LTV of 70%, and is available across everything from renovations to conversions. Having spoken to brokers and borrowers, we know that there will be times when the cost of a project ends up surpassing what they initially expect, so the Extend or Convert Refurb allows for further advances too, without the need for a new facility, meaning that additional legal fees are avoided.

Flexibility is crucial here. We know that investors of all kinds may want to undertake these sorts of projects, and across a host of different types of property investments too, so the product is available across residential, semi-commercial and commercial-to-residential conversions, while the loans can be utilised for all sorts of purposes such as heavy refurbishments, PDR schemes and finish and exits.

Moving quickly

Brokers don’t need me to tell them just how fast-paced the property market is right now. Anyone within the bridging industry is used to working to tight deadlines, as investors look to clinch deals before those winning properties catch the eye of rival investors or plucky first-time buyers.

But the market has taken on a frenzied air of late, as the first stamp duty holiday deadline has approached. And while that deadline has now passed, the reality is that the desire to purchase property is going nowhere. Due to the phased nature of the removal of the holiday now, investors are well aware that they still have a couple of months in which to clinch those additions to their portfolio at a reduced tax burden.

As a result, lenders who are able to move swiftly and deliver the required funding in a reliable and prompt manner will always be well regarded by brokers and their clients. We have spent a lot of time reviewing our service and processes, to ensure that we can help investors take advantage of those refurbishment opportunities within just days of submitting an application.

Substantial refurbishments can deliver big returns for property investors, but only if they can turn to lenders who understand those projects and the need to deliver the required funding rapidly.

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