how heavy refurb can maximise rental income

The UK rental property market is experiencing rising prices as demand outstrips supply. While the initial effects of the pandemic resulted in the so-called ‘race for space’ as buyers rushed to purchase spacious homes, we are now seeing office workers and students returning to city centres. This – coupled with the lack of available properties – has resulted in rents rising by 8.3% in the last quarter of 2021, the quickest increase in over a decade.

the importance of covering overheads

It isn’t just renters facing increased costs though. As has been well documented, prices of everything from food to fuel are spiralling and the Bank of England has warned that inflation could continue to rise. It is crucial that property investors and landlords not only cover their overheads but ensure they have enough margin for error.

The best way of achieving this is by ensuring landlords are getting maximum yield out of any rental property. There are often multiple ways a property can be made more profitable, from undertaking a light modernisation to more substantial structural works, including extensions and reconfigurations. It is likely that any increase of the square footage will help to secure a higher rental income.

Converting unprofitable or empty commercial spaces into HMOs is another solution. This option will also help to provide some of the private rental units the UK so urgently requires. Recent changes to Permitted Development Rights has helped to make this process smoother, meaning some projects won’t need to seek planning permission; as long as they adhere to the limitations and conditions. Not needing planning permission can significantly speed up the process of securing finances, including bridging loans.

how bridging finance can help

At MT Finance we provide bridging finance for a variety of purposes, from purchasing an investment property to undertaking a heavy refurbishment project. We recently worked on a case where a client was partway through converting a large commercial property into residential flats. Due to other investment opportunities within their business, they needed to release further capital to complete the works and allow them to continue with onward investments. As the client was a BVI company, they didn’t want to wait for the complex process of securing long-term finance. They had worked with us previously and had first-hand experience of our ability to deal with complex income structures.

Despite numerous challenges – including needing to instruct two sets of lawyers, one in the UK and one for the BVI aspect of the business – we delivered the first tranche of £415,000 based on the £1.8m current value.

After the first lot of works were complete, the value increased to £2.3m and as the LTV was so low, we then released the full amount (£681,860) to the clients based on this uplift in value. Interest was retained at 0.80% over a 15-month term. As with all our bridging loans, there were no exit fees or ERCs. The 15-month term gives them plenty of time to complete the project, adding another property to their growing HNW portfolio. They will then refinance against the increase in value and the income from the let units.

a tailored solution

Whether you are starting a new heavy refurbishment project or are halfway through a project, securing finances fast can often be difficult. We understand the need to move quickly and efficiently and this – coupled with our ability to take a common-sense approach to every case – allows us to quickly deliver results. Our heavy refurb bridging loan can be used for both residential and commercial properties at up to 65% LTV based on the property’s value. We can provide up to 100% of build costs in stages to help keep your costs down and also offer further drawdowns as the works progress. Each request for further funds will be based on the property’s increased value at the time of application, allowing you to borrow more. Terms vary from one to 24 months but if you exit your bridging loan early, with MT Finance you won’t face any fees for doing so.

Our team is always on-hand to help with any queries you may have about our light or heavy refurbishment bridging loans. If you’d like to find out more, they can be contacted via email, online or on 0203 051 2331.

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