A third of landlords still using personal savings to fund projects, claims new research

Warren Lewis
12th November 2019

According to the latest research and analysis from InterBay Commercial, one in eight landlords are still in the dark when it comes to knowing what type of finance is available to them for refurbishment.

The firm suggests that greater education is needed on the refurbishment finance options available to landlords, after its research found that a third are using their personal savings to fund projects.

The survey revealed that of those who had undertaken a refurbishment recently, 34% opted to use personal savings to fund it with 18% using their credit card debt or an overdraft. Furthermore, 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.

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 to 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, head of sales at 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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