Refurbishment bridging finance is often talked about as a way for investors and property developers to increase the capital and rental value of a property.
In many cases, this can include heavy refurbishments, potentially even requiring planning permission, and can be expensive projects for a property investor to undertake.
Not every property enhancement requires this level of work though, and there are many improvements that can be funded with a standard bridging loan that might not attract the same loading as a refurbishment loan.
Light refurb adds value
New kitchens and bathrooms, for example, are an extremely popular way for investors to increase the value of their property without carrying out extensive building work. According to figures from Halifax, a new kitchen could add up to 10% to the value of a home, depending on the scale of the refresh.
Adding the latest mod-cons, installing a kitchen island or creating an open plan dining/living space are all considered desirable features among buyers. Installing a new modern bathroom could push the price of the property up by 5%, particularly if there is room to install a separate bath and walk-in shower.
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Even simple things such as rewiring, changing flooring or installing a new boiler can all add to the appeal of a property, particularly as these are often major expenses that new homeowners may want to avoid once they move in.
With this in mind, it is important that brokers ensure they fully consider the aims and objectives of their property investor clients before recommending a refurbishment loan. This may not always be the most suitable option for landlords looking to make minor improvements to their property.
Cost-effective borrowing
In the majority of cases, as long as a property is habitable at purchase, a standard bridging loan could be a more suitable and cost-effective option. This will enable the investor to carry out the renovations they need at a cheaper rate of borrowing.
A standard bridging loan can be a great way for landlords and investors to bring new and existing underperforming assets up to scratch, increase their value and subsequently improve yields. The property can then be rented out to tenants for a higher level of rent or sold with a higher market value.
Standard residential bridging loans can be used for various purposes, including extensions and refurbishments. This makes them an ideal solution for an investor or landlord who is looking to update a property without carrying out extensive structural work.
Many standard bridging loans are available on a short-term basis of between three and 12 months, making them a suitable option for smaller property updates that do not require a lengthy time commitment, such as painting and decorating or installing a new kitchen or bathroom.
As the funds are released quickly, often in a matter of days, they can provide investors looking to move rapidly on a project or property with secure and swift access to finance. The loan can then be repaid once the work is complete, and the property is sold or remortgaged.
In situations where brokers have clients seeking to add value to their property portfolio without carrying out extensive structural renovation work, taking out a standard bridging loan instead of a refurbishment loan may well be the solution they need to help them achieve goals.
