Using Bridging Loans to Bring Derelict Homes Back to Life

Posted by Market Financial Solutions on 28th March 2022 -

Getting empty homes back on the market is a pressing issue for the property industry. For prospective buyers and renters, this would boost housing stock and create new possibilities. They also hold attractive renovation opportunities for property investors.

In this blog we will:

• Explore the number of empty homes there are across the country
• Assess the value of property auctions for those looking to invest in them
• Examine the key things people should consider if they are undertaking a property refurbishment or if they require a refurbishment loan

Renovating derelict homes

It’s estimated that there are around 216,000 homes in England alone that have been empty for six months or more. In total, there are thought to be 600,000 vacant residential properties. Given the chronic undersupply of housing in the country, making better use of empty properties is a logical place to start.

Source: UK Government

In fact, our research from October 2021 showed that 52% of Britons consider the housing shortage to be one of the country’s most pressing social issues. Yet only 15% think they will see the problem solved in their lifetime. Further, just 30% are confident that they will one day live in their own home.

We therefore took upon ourselves to ask the key question: what can be done to boost housing

Investors can refuel the market

Property investors have a key role to play. Whether they’re looking to:

• Renovate and then sell-on the property
• Refurbishing then renting the premises, investors can help boost the number of homes available to buyers and renters.

For those considering an investment into a run-down, empty property, it is worth looking to auction houses. Our Guide to Property Auctions is a great place to start.

Many probate properties – that is, properties owned by someone who is deceased – are listed for sale via auction. Some might be in a poor condition, making them unsuitable for a straightforward sale or rental via the open market. More experienced investors at auction, however, could be attracted by the potential to secure the asset for a lower price.

More generally, buying a property at auction is popular for the quick processing of the deal. Yet they also present challenges. Not least, a bidder must deliver the funds to buy the property within a short timeframe after the auction, typically around 28 days. That is why fast bridging loans are so popular among those buying at auction.

Focus on green improvements

Derelict properties will usually need to be modernised.  Investors purchasing vacant properties should consider energy efficient improvements as part of the modernisation process. This is certainly true of anyone looking to hold onto the asset as a buy to let property.

In April 2025, the Government will be introducing new regulations, requiring any property being let to new tenants to have an Energy Performance Certificate rating of C or higher. At the moment, 60% of homes are rated D or below, so action is needed. There will be fines of up to £30,000 if a property does not comply.

How can I improve my property’s energy efficiency?

For investors and landlords, renovating a derelict home is the opportune moment to also improve the property’s energy efficiency. Here are five changes to consider:

1. Install energy-efficient lighting throughout the property
2. Replace an old boiler
3. Add cavity wall insulation
4. Add loft insulation
5. Install double or triple glazing

You can find a more in-depth article on our Top 5 energy efficient hacks here.

Taking financial action

Investors may consider a property refurbishment loan to finance this. This is particularly true of those who might be looking to sell the asset once the works are complete. Whether you require a loan for renovation works, to purchase of the asset itself, or both, it’s advisable to explore all financial options first.

There are many types of fast, flexible bridging loans available for those looking for short-term finance. Having the right option lined up before committing to any project involving a derelict property is wise.

A lot of people could benefit if the UK’s derelict, vacant and run-down homes were brought back to life and put back on the market, either for sale or to let.

Investors thinking about tapping into this often-overlooked corner of the market, should first think about their financial options. MFS can provide buy to let bridging loans, home refurbishment loans and loans for auction purchases. We also supply second charge loans, should you wish to raise additional funds by securing it against a property that already has finance secured against it.

Get in touch today to find out more about how our products could help.