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Refurb loans helping landlords manufacture value

Mark Posniak Mark Posniak
Posted on May 20, 2019 | in Blog

Refurb bridges, both light and heavy, are becoming the go-to loan for portfolio landlords in the current environment.

Reflecting this, at Octane we saw a 40% rise in refurb loan AIPs (agreements in principle) during the first three months of 2019 compared to the same period last year. There are two reasons why this is happening: profits and PRS.

The stringent tax regime landlords are now facing means they have to manufacture value by whatever means possible — and one way to boost their margins is to breathe new life into, and even reinvent, their portfolios.

So, we’re seeing lots of ‘change of use’ loans at the moment, with houses being turned into multi-unit conversions and bigger houses, once planning permission has been granted, being turned into HMOs (houses in multiple occupation).

HMOs can offer particularly strong yields and in the current environment, yield is everything.

The Private Rented Sector (PRS), meanwhile, is forcing professional portfolio landlords to rejuvenate their properties and genuinely up their game.

While the retreat of amateur landlords is a positive development for portfolio landlords, as there’s less competition on the ground, PRS represents a material threat.

In order not to be left behind by the growing number of lifestyle PRS developments, increasingly favoured by millennial tenants in the UK’s major cities, landlords are having to inject a lot more panache into their properties — and so refitting and modernisation are understandably on the up.

People who have resigned themselves to renting for life now have much higher standards and refurbs are a way for landlords to add some all-important gloss to their units. 

And let’s not forget that refurbishment work will also generate capital growth, which can’t hurt in what is a largely flat housing market. 

 

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