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Mitigating the risk of refurbishment investment – Arnold

by: Joe Arnold, managing director of Arnold & Baldwin
  • 27/11/2018
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Mitigating the risk of refurbishment investment – Arnold
The combined impact of an extra 3% Stamp Duty Land Tax and income tax changes mean your clients are looking for more creative ways to increase their returns on a property investment.


This is leading to growing demand for alternative investments, such as houses of multiple occupation (HMOs), holiday lets and refurbishment projects.

And this is particularly so among landlords who have previously only been involved in traditional buy-to-let.

The most recent Bridging Trends data from short-term lender MTF, found that funding refurbishments was the most popular reason for obtaining bridging finance in Q2 2018.

The research found that just over a third (34%) of all lending in the second quarter of 2018 was for refurbishment purposes, up from 18% during the first quarter of 2018, as borrowers sought to maximise the value of assets.

This is the second time refurbishments have been the most popular purpose since the research was launched in April 2015.

The previous occasion was during the same quarter last year, which shows the growing popularity of refurbishment investments.


Can seem daunting

Moving from a traditional buy-to-let investment to investing in refurbishment projects can seem daunting to investors at first.

They may have concerns about the value they can add by carrying out work or be uncertain about their options for letting or selling the property once the renovations have been completed.

If some of your clients are looking at property refurbishment for the first time but would like more certainty before taking the leap, working with a chartered surveyor could help.

This can also support experienced property developers who want to reduce speculation to mitigate their risk.


Expected capital and rental gains

A surveyor will be able to not only establish an accurate value for the property in its existing condition, but also provide unbiased information on the expected capital or rental value once the renovations have been completed.

This can help your clients to consider their favoured exit, which could influence their finance options.

A surveyor could help to establish the future value on light refurbishments, where no planning permission or building regulations are required, or heavy refurbishments where there are more fundamental changes to a property.

On heavy refurbishments a surveyor could even carry out staged visits to the property to confirm the project is on track.



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