There’s an expression I’ve been hearing lately that’s a new one to my ears. A “refurbish-to-let” – which is, for those of you who aren’t in the know like me, the latest trend in the world of high-value buy-to-let properties.
The refurbish-to-let movement is firstly a consequence of rising property prices pushing down rental returns for landlords. It is secondly a result of rumours of an impending mortgage rate increase over the coming months. It refers to the trend of landlords making a concerted effort to profit from refurbishments and is emerging as both a commonplace and convenient solution to boost total profits. (This can range from decorating throughout, or a full refurbishment, including new kitchen and bathrooms etc.)
The strategy of buying rundown homes and giving them a drastic refurbishment has been broadly successful in achieving its goal – namely increasing their market value and increasing rental yields. The lenders with whom we work are reporting that more landlords are now hoping to buy a high value buy to let property in need of work cheaply with the intention of raising finance to enable these renovations, which is, of course where Enness comes in.
This trend ties in with the highest yield high value buy to let movement towards “HMO” investing, in which multiple tenants live together.
Another long-term advantage of the refurbish-to-let is the fact that it cuts down on maintenance costs and attracts higher quality tenants who are keen to establish roots.
However, although this all sounds rosy, raising the finance for a refurbishment project is harder to achieve than the typical high value buy to let – restricting your options. Especially if the property is not currently habitable or able to be let in its current state.
Traditionally most investors wanting to embark on a refurbishment project would raise mortgages on one high value buy to let property in order to pay upfront to refurbish the next. And so on as their portfolios expand.
However, if this is not possible, Enness has alternative high value buy to let options which may be feasible.
Typically, a full refurbishment process often consists of numerous applications, valuations and surveys and complicates the situation. This is because lenders are much keener on the structural shell remaining the same on high value buy to let properties that they’re lending on. So, if you’re not just modernising with a lick of paint it’s best to consult a broker who knows how to present your case.