Responses from Nicola Ferguson, commercial and bridging specialist, Clever Lending
Q: What kinds of properties are you seeing being refurbished the most?
NF: Generally, we are seeing a lot of conversions such as closed pubs converted into flats, large properties converted into Houses of Multiple Occupation (HMOs) and commercial property conversions where the upper floors are turned into residential and the ground floor is retained for commercial use.
Current market conditions mean property investors now have to convert properties into high yielding rental offerings to enable them to re-mortgage the properties at a later date and achieve the maximum loan-to-value (LTV) available. This is mainly because standard Assured Shorthold Tenancy (AST) properties are only attaining on average LTVs of between 50% to 65%.
Q: How important is retrofitting/making buildings more environmentally friendly? Is this something that most applications consider now, with EPC rating rules etc?
NF: It is definitely becoming more important as we creep towards the 2025 deadline. We are starting to see more clients enquire about discounted products if the property they own has an EPC rating of C or above. However, this is not really that common currently but I would imagine enquiries will increase considerably in 2024.
Q: How often do property developers present applications with misconceptions? And why do you think this is?
NF: It is actually quite common and therefore it is the job of a good broker (such as Clever Lending) to ensure they collate all the relevant information required by the lender before fully presenting it to them for consideration.
Most of the time this happens with inexperienced builders or developers, or first-time buyers for self builds for example, as they do not realise how much information is required by the lenders in order to establish whether or not it is a good project for which to provide funding.
We tend to find that once a customer has completed their first project, as with most experienced professional property developers and builders they are generally more prepared and have the basic information available on the initial enquiry. Lenders requirements can change and each project may have specific requirements, so it’s good to keep talking to us.
Q: What’s your best advice for those looking to invest in refurbishment?
NF: The best advice I can give is to not rush into any purchase. Do your due diligence and buy at the right price, although I know this is easier said than done, but it’s important to be patient as rushing into a decision always causes issues later on.
It is also important to ensure you are adding value to the property. If you are not flipping the property and re-mortgaging onto a Buy To Let, double check that you can raise the loan amount you desire first.
Refurbishing the property into a high yielding property such as an HMO or holiday let is also advisable as most standard property AST rentals do not stack up at 75% LTV currently, and are, on average, achieving LTVs of between 50% and 65%.
