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  • Products and Services

    Finance innovation for landlords



    The following is a sponsored post on behalf of Brightstar Financial Services.

    Opening the door to property refurbishment

    As a landlord you are probably starting to feel the squeeze of increasing tax and regulation, so what steps can you take to protect your returns?

    A growing number of property investors are realising that they can counter the increasing costs of buy-to-let and generate better returns by buying a run-down property and renovating it to achieve a higher re-sale price or retaining the property and benefitting from increased rental income. This is known as property refurbishment.

    Often, the properties that provide the best opportunity for refurbishment are in a condition that makes them effectively unmortgageable. So, lenders have developed short-term finance products designed specifically for property refurbishment.

    There are two types of property refurbishment:

    Light refurbishment

    This is where no planning permission or building regulations are required and there is no change of use to the property. Light refurbishment renovations commonly include new bathroom, new kitchen, redecoration, rewiring, new windows etc.

    Heavy refurbishment

    This is where there are structural changes to the property that require planning permission or building regulations.

    Refurbishment finance is usually taken over six or 12 months, during which time an investor can purchase a property in need of renovation and carry out the work to increase its value before deciding whether to retain and refinance onto a longer-term solution or sell the property.

    Interest on refurbishment finance will usually be rolled up, which can help with cash flow during the renovation period, and rates are often available for less than 0.50% a month. This provides an opportunity for investors to leverage their capital and can ultimately help them to generate greater returns.

    For example, assume an investor buys a run-down property for £200,000, using refurbishment finance for £100,000 that is charged at 0.50% each month.

    The investor spends £20,000 renovating and decorating the property, adding a new kitchen and bathroom. They then sell the renovated property 12 months later for £280,000.

    Over the course of the 12 months, the interest on the bridging loan adds up to £6,000, plus fees – and so even considering the costs of buying and selling the property, the investor can realise a good return that more than outweighs the cost of the refurbishment finance.

    This is a hypothetical example and there are many considerations with this type of investment, but it demonstrates how refurbishment finance can be used to generate value.

    Selling a property once it has been renovated is just one option, of course, and many investors choose to use refurbishment as a way of achieving a higher ongoing rental income. For these landlords, a common concern is whether they will be able to refinance onto a cost-effective longer-term mortgage.

    But Precise Mortgages has launched a new product that tackles this concern with its Refurbishment Buy-to-Let mortgage, which combines a short-term refurbishment facility with a longer term buy-to-let exit.

    This gives investors the combined benefits of a flexible short-term refurbishment mortgage, that can be used to increase a property’s capital value and achievable rental income through, along with the peace of mind in knowing they already have the surety of a long-term exit solution in place once the works are completed.

    The product is available for light refurbishment renovations and no repayments are required while the works are being carried out, which can help with cashflow. The buy-to-let ongoing mortgage offer is underwritten simultaneously and remains in place for six months, provided there are no changes and the property meets the expected value following refurbishment.

    It’s ideal for properties that need work, such as boiler replacement, to meet minimum EPC ratings, properties purchased at auction that require light refurbishment to be acceptable for mortgage purposes, landlords choosing to refurbish in order to maximise the rental yield of their property, and properties bought under market valuation.

    The refurbishment finance is available up to 75% LTV, with rates from 0.49% per month and the subsequent buy-to-let mortgage is available up to 80% LTV, with rates from 2.89%.  Two offers are provided simultaneously at the outset and the there is a streamlined process and with one valuation report and one set of fees.

    This product means that landlords can invest in a property requiring light refurbishment, with the peace of mind in know they have cost-effective ongoing finance in place from the outset, with as little as a 25% deposit and it’s an excellent example of a product being developed to meet a customer need.

    Find out more about this finance to term product.

    So, if you are thinking of ways to boost the returns on your investment, it might be time to think property refurbishment. Renovating a property will always have its complications, but lenders are increasingly making sure that arranging the finance doesn’t have to be complicated.



    Find out more about this finance to term product.

    You can also call the Brightstar Financial team on 01277 561 139.

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    We are about to apply for this finance to buy a property that need light refurb. It will be amazing if this works as it may be just a perfect finacial tool for small developers like us to tackle a problem of buying uninhabitable house to let or flip.

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