Gavin Seaholme

Heavy refurbishment: plenty of rooms for improvement

It’s undeniable that the impact of lockdown in the UK has been far reaching.

The property market, like many other industries, ground to a halt. This was especially apparent in the bridging and heavy refurbishment space, where the effects amongst builders, surveyors, project managers and suppliers involved in heavy refurb projects were widely felt as the pandemic took its toll.

But the period since restrictions have eased tells a different story. Lenders have adapted to difficult circumstances and demand for bridging loans is bouncing back, with the recent challenging period now providing potential opportunity for investors.

Bridging and heavy refurbishment finance are great tools for experienced clients to consider in their property investment strategy to add value to an asset. An example would be taking advantage of the new permitted development rights, which allow businesses and investors to convert vacant spaces into homes without planning permission. The new rules, starting this month, could see experienced property investors look to change property use from commercial to residential, creating value in larger HMOs. Shawbrook is supporting this market and has seen an uptick in clients utilising heavy refurbishment for higher yielding assets, such as larger HMO, multi-unit blocks, and through converting space above commercial property. There is a great demand for this product for these main uses, presenting a great opportunity for lenders to build relationships with clients through enabling a short-term solution that supports projects from beginning to end.

A recent example of heavy refurbishment creating real value is a project we recently undertook with our broker partner, Go Finance. The client was looking for short-term finance to convert a single-family dwelling into a six-bed HMO which required updating throughout, with a substantial amount of work needed to modernise the property. With expert guidance from our broker partner and a fast and flexible approach from us, the client was granted the funds required. The client secured the exit route to a term mortgage, enabling them to recover their deposit and the refurbishment funds spent, as the value of the property had increased almost 40% from the purchase price.

For investors considering using bridging to fund a heavy refurbishment project, as this recent case highlights, experience is key — along with a knowledgeable team to support you. There are a lot of moving parts, so ensuring builders, project managers, broker and lender are all aligned to understand the requirements and timescales is essential and working closely with all parties is vital. From an adviser point of view, it’s about understanding a client’s short-, mid- and long-term strategies. As this is a specialist area, knowing the market is important, and timescales are essential to making sure the client gets the best possible outcome, combined with a clear exit strategy. There can be a lot of hidden costs involved so making sure advisers work with the lenders that are client led and transparent is of the utmost importance to this part of borrowing.

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