There are many properties around the UK that have fallen into a state of disrepair and other properties that are ripe for conversions. Examples of those requiring refurbishment are properties that have not been maintained by either previous owners or tenants and require modernisation and upgrading. Examples of properties that present conversion opportunities are, houses to flats or HMOs, or pubs into apartments. Acquiring such a property, presents the investor with the opportunity to make capital gains and also to enhance the rental income.
Not everyone has experience of taking on such projects, but this does not mean that novices shouldn’t embark on such schemes. However, it is very important that they seek out good advice and carry out due diligence before embarking on such projects.
Know the rules and regulations
The initial starting point is to understand the rules and regulations in place. For example, ensure that all consents are in place, such as change of use if converting a public house into flats or planning consents for extensions etc., before committing yourself to the project. It is essential to have a detailed refurbishment/conversion plan in place. This should include full details of the intended works, costs and timescale. An equally important part is to know what the gross development value (the value of the property when the works have been completed) will be as well as the potential rental income.
There are various financial options available for these types of projects, and the most suitable one depends on a number of factors such as, the scope of the works, the experience of the person undertaking the project and sometimes the location. This type of finance tends to be short term, ranging from one to eighteen months. As well as the finance costs, there are costs such as stamp duty, valuation costs, legal and broker fees to be taken into consideration.
Access to short term finance for renovation projects
As this type of finance is normally short term, it is necessary to have an exit strategy in place. There is always the option to sell the property when it is completed and to move on to the next project, or the preference might be to retain the property and let it out, in which case it will be necessary to replace the existing finance with a buy-to-let mortgage.
The refurbishment checklist will provide those interested in going down the refurbishment/conversion route with a good idea of the main points to be taken into account prior to committing to purchasing such a property. Refurbishment/conversion projects are the preferred route for many landlords and developers to maximise profits, however there can be risks involved and therefore it is essential, especially for the novice, to get expert advice before embarking on such projects.
Guest article from Brooklands Commercial Finance
Brooklands Commercial finance Ltd is one of the UK’s leading brokerages that specialise in property finance. Their area of expertise include all forms of Bridging Finance, Development and Refurbishment Finance, as well as financing HMOs.
They were established in 2003. They are a privately owned and independent brokerage that has been built on the belief that a personal and dedicated service is vital in today’s complex world of finance and that every client is unique and their needs are different. They are “whole of market brokers” which means that they have access to all lenders, including the High Street Banks, Merchant banks, Specialist Lenders and Equity Funders.