34% of landlords used their personal savings to fund their last refurbishment
Nov 12, 2019 ~3 minute read

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Greater education is needed on the finance options available to landlords when it comes to refurbishments according to InterBay Commercial’s latest report Unlocking value: “The role of refurbishment in buy to let”. Indeed, InterBay Commercial, part of OneSavings Bank found that one in eight landlords surveyed said they were unaware what type of finance is available to them for refurbishment.

Many landlords had or planned to rely on their own means to fund a refurbishment. Of those who had undertaken a refurbishment recently, a third (34%) had used their personal savings and 18% had funded the refurbishment using credit card debt or an overdraft. In addition, those that haven’t yet refurbished a property primarily also expect to rely on credit card and overdraft debt (32%) or personal loans (31%).

However, of those landlords that had used finance to fund their refurbishment in the past, remortgaging was a popular option. 18% had used a remortgage buy to let loan, with a further 30% expecting to use this option for future refurbishments.

Interestingly, for those landlords which would consider finance options for their next refurbishment, flexibility was a key consideration for many. Indeed, 31% of landlords that would use mortgage finance said that they would like the ability to access smaller sums from a loan facility during the project. This would help them maintain their cash flow and keep their risk exposure down. However, 30% of landlords would choose to access a lump sum from a lender at the outset of a project.

According to InterBay Commercial’s report, landlords will spend £12,000 on average per refurbishment, with many doing so to improve the quality of the property. While, light refurbishments were more popular, heavier scale projects could add an average of £96,000 to a property’s value from a £40,000 outlay.

Darrell Walker, pictured, Head of Sales, InterBay Commercial commented:

“Refurbishments can be a great way for landlords to both increase the attractiveness of their properties and its value but it’s concerning that so many landlords are unaware of their finance options when undertaking such a project.

Education is vital in order to ensure that landlords are no longer relying too heavily on their own personal funds to improve their properties. With better understanding of the options at their disposal, landlords can choose from a variety of options from remortgaging to a bridging loan- making a refurbishment much more feasible and likely. Indeed, plugging the knowledge gap will not only benefit the landlord, but also the end tenant too.

From our research we know that landlords value flexibility highly when it comes to choosing finance products for a renovation. This means finding the right product to fit the landlords’ circumstances. Brokers can play a valuable role in ensuring that landlords do access the right finance option so it’s important that they understand the range of support and flexible products that lenders can provide to help meet their client’s needs.”

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