The pandemic will impact property investors in a number of direct and indirect ways.
Many landlords, for example, have already experienced a direct loss of income as the economic effect of multiple lockdowns has led to more tenants missing rent payments.
A more indirect consequence could be the potential increase to Capital Gains Tax the chancellor is reportedly considering as a means of helping to repay the vast cost of the last year.
Either way, it seems reasonable to assume the trend will continue for investors to explore options with the potential to deliver better returns to offset increased costs.
Maximise returns with refurbishments
One way for property investors to maximise their buy-to-let returns is by purchasing a property that requires some work to make it fit for purpose, carrying out the work, and then letting it out.
It’s often the case that a property considered uninhabitable, and therefore unmortgageable, could be made habitable with relatively straight forward light refurbishment, providing there is no structural work or planning required, so, bridging finance is a valuable tool in this area of the market. But one area of concern for brokers is whether there will be a suitable buy-to-let product available that enables their client to exit the bridging loan on time once the work is complete.
This is likely be a growing concern this year as term lenders tread carefully in the uncertain economic environment.
With this in mind, expect to see more demand for bridge-to-let products, which combine the short-term finance to complete any necessary changes required to make a property mortgageable with a pre-approved buy-to-let mortgage once the property is ready to be let out for rental income.
Service levels and value increase
With bridge-to-let loans the two funding facilities can be approved with one application process, which means no doubling up of work, no extra costs and no delays.
This could also prove particularly useful this year as continued remote working means service levels will remain a key consideration.
Some lenders can also factor in the value uplift resulting from any renovations when it comes to agreeing the terms of the buy-to-let mortgage.
We are also likely to see a shifting demand in the types of property refurbishment carried out by investors to meet the changing requirements of renters.
More people are looking to move to larger properties outside of major conurbations, and the supply of good rental property in these areas is often limited.
So, there will be opportunity for investors to satisfy the changing demands of the rental market by updating the housing stock in more rural locations.