25 Jan 2019

Turning ambitious refurb plans into reality

Refurbishment is a great way for landlords to increase the value of their property and boost their rental income. But when a property needs a significant and expensive ‘refurb’, it can sometimes be difficult to get lenders to be both flexible and price-competitive. In this case study, we show how one borrower managed to secure the refurb financing they needed, thanks to their broker and Octopus Property. 

The property 

The property was a four-bedroom mid-terraced property in Putney, South West London. It had damp and needed to be completely gutted, before being refurbished with new plumbing and electricity.

The borrower

The borrower was a knowledgeable property investor, who wanted to purchase, extend and refurb the property through his company, with the aim of increasing the property’s overall value and rental value.

The refurb project

The borrower had a very clear idea of what needed to be done to make the property a good rental prospect, he had already completed similar works on his own property nearby. Even better, his wife was a very experienced architect. 

The plan was for the refurb to be completed across five phases, with a total project timeline of 9-12 months. The refurb included a side return extension and a mansard roof extension, which would take it from a four-bedroom property to a five-bedroom. The plan also involved significant reconfiguration works, including refurbishment throughout and moving the existing staircase to create a better flow. 

The problem

The biggest challenge facing the borrower was that no planning permission was in place. His applications were pending a decision. In the event that planning permission was not granted, ‘Plan B’ was to build an extension which could be carried out under permitted development rights. 

However, this was really the least desirable option, as the extension would reduce the hoped for overall square footage and restrict the value placed on the property when the refurb was completed. 

The broker: David Tinsley, Coreco Specialist Finance 

Fortunately for the borrower, he had a very experienced broker working on his behalf: David Tinsley of Coreco Specialist Finance. Here’s what David told us:

“I was fortunate enough to be working with very charming, professional and engaged clients. This needed to be matched by an equally charming, professional and engaged lender! Having shortlisted a number of appropriate specialist bridging lenders, it turned out many came up short on the borrowing facility required. My clients were understandably price sensitive, both on interest and fees. But Octopus showed appetite, a can-do attitude, and a keen eye on pricing. They provided me with sufficient confidence to get this deal over the line.”

The solution

Our asset manager visited the property. They concluded that the borrower had a good understanding of the project, cost and design, as well as the planning process and permitted development. Therefore, we concluded the projected should be completed on time and on budget.

The lending terms 

This loan had a first charge on the refurbishment property and a second charge on the residential property owned by the borrower, which was required in lieu of a deposit.

- Purchase price: £1,015,000

- Total loan: £1,356,250

- Interest rate p.a.: 9%

- Term: 16 months

- LTC: 88%

- GDV: £1,650,000

After purchasing the property, the borrower only paid interest on drawdowns. Because we believe that with an Octopus Property loan, it’s only fair that borrowers only pay for what they use.

The broker’s view

David was very happy to find such a great deal for his clients. Here’s how he summed up the experience: 

“A big facet of the deal was the amount of facility needed to make this work. Many lenders struggled on this part, but not Octopus. Chris Chapman and Chris Scott were both incredibly responsive and proactive throughout the entire transaction, and they were always prepared to go the extra mile to achieve a successful completion. Given the difficulties with the background on this case, I believe many lenders would have struggled to deliver what Octopus ultimately achieved, and in what was a very tight timescale.”

“I have every confidence in the team at Octopus for any future transactions that come my way. Definitely my ‘go to specialist lender’ on this type of transaction, that’s for sure.”