Dan Standing

A guide to light and heavy refurbishment

Short-term loans are becoming increasingly popular in today's ever-changing financial landscape with product innovation continually hitting the market, partly as a consequence of a hugely competitive lending environment.

The short-term loan allows a customer rapid access to timely funds designed to facilitate a quick purchase, a development exit or finance to carry out works to the property — both on a light and heavy refurbishment basis.

Professional investors are always looking at ways that they can push their returns and are increasingly turning to short-term loans to help them on this journey. One of the most common ways of doing so is by carrying out works to a security — either already within a portfolio or a new purchase — with a view to enhancing it, but also in the scenario of a new purchase to obtain planning.

There are two primary offerings available to the professional investor and landlord community within the short-term loan market; if the applicant is looking to carry out a level of works to the security which can be categorised as either light or heavy refurbishment.

A light refurbishment gives the applicant the opportunity to buy a property for a competitive price and allow the required works to be carried out. Traditionally, this type of refurbishment takes the form of a new kitchen, bathroom and general decoration which is designed to increase the value of the property and subsequently allow an increased level of rental income to be achieved. On some occasions this level of refurbishment can be used to convert a property to a small HMO (house in multiple occupation) where only light works are required to do so. If we look at the Shawbrook short-term loan offering as an example, it allows the customer the ability to fund all or part of the works, meeting a specific investor need.

If the applicant is looking to obtain planning to significantly convert the security, then a short-term loan can be used for the purchase in order to hold it until planning is obtained. Once this is in place, then a heavy refurbishment product can be used to move the project forward.

The heavy refurbishment projects fundamentally allow an investor to carry out structural works to the security. This may include increasing the footprint by way of various extensions, or converting a security to an HMO where planning exists.

When considering either light or heavy refurbishment options, it is important that an investor knows the local market as all properties will have a ceiling and the value would be unlikely to increase above this level.

We are of the belief that lenders should look to develop long-term relationships with brokers and customers, doing all they can to support a sustainable industry that has best practice at its core. This involves supporting the investor community throughout their property journey as they build and grow their portfolios. It is something that features heavily within our own proposition and we are proud of the work we have done to provide tailored products to this market, using a combination of internal expertise and feedback from all our stakeholders.

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