Refurbishing properties, with the goal of selling them at a profit or letting them out, is a common strategy among investors. It has also typically been considered something of a safe haven, due to the consistently robust performance of the UK’s real estate sector.
Traditionally, investors have shown preference to homes and commercial properties in need of only rudimentary refurbishments, in order to be swiftly ‘flipped’ and turned into a profit generator. Today, evidence suggests that investors are increasingly setting their sights on more significant refurbishments, in order to further boost potential revenues.
Rather than simply enhancing the appearance of a property or installing a new kitchen, investors are considering the untapped potential of vacant properties in more ambitious ways.
Extensions and Repurposing Prove Popular
For example, there has been a major uptick in the number of investors conducting loft conversions, property extensions and other major structural adjustments.
For the most part, this is due to the potential for more spacious properties to appeal to a much broader audience of buyers. Increasingly, movers and first-time buyers alike are setting their sights on larger properties with space for working at home. Having become accustomed to spending more time at home, people are prioritising spacious and versatile homes over convenient access to city centres.
Based on analysis of Rightmove data, a study conducted by Abbey Lofts earlier this year found that converting a loft into a functional living space can increase the value of a home by as much as 25%. Meanwhile, a previous study conducted by Nationwide found that even a basic extension can increase a home’s market value by more than 10%.
All of which have the potential to generate significantly higher profits for investors than the usual rudimentary improvements. This goes some way to explain why investors are setting their sights on more ambitious projects, in the hope of generating even bigger profits from the properties they purchase.
Funding Major Property Refurbishments
Property investors and developers have access to a broad and diverse range of funding solutions to cover the costs of these extensive projects. One of the most popular options is bridging loans, which can often be used to cover up to 100% of the costs of the project with loan values of up to £5 million.
Bridging loans provide the ideal option for house flipping projects, as they are strictly short-term in nature. They can be arranged in a matter of days, utilised for any legal purpose and repaid as soon as the project is complete and the property is sold.
With monthly interest rates typically hovering below 0.5%, bridging finance can also be a uniquely cost-effective option.
Investors considering major renovation projects are strongly advised to consult with an independent broker at an early stage, in order to gain a full understanding of the funding solutions available.
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