Providing Finance for an HMO Property That Needs Refurbishment Work

Loan Amount:
£426,000

Property Value:
£600,000

LTV:
70%

Landlords can often generate healthy yields from HMO properties, but the returns may not come easy. These assets usually require more due diligence and attention from investors. More stringent minimums are in place, and landlords who fall foul of them can face costly repercussions.

Our underwriter had to help a BTL investor who could have faced this kind of predicament. They were investing in an HMO property, but it needed refurbishment work to make it compliant with the rules and attract premium tenants.

To keep this deal progressing, we had to assess the investment’s potential, along with the borrower’s plans to bring the property up to scratch.

Making sure plans were in place

During the underwriting process, we gathered paperwork to confirm that plans were in place to work on the property. We also collected evidence determining that the borrower had the financial means to get the refurbishment started asap.

Furthermore, we determined that the property was in a strong location, meaning it would be desirable for potential tenants or buyers. In addition, the rental yield available to the borrower was at a good level due to the premium nature of the intended tenants.

With these assurances at play, coupled with the borrower’s experience with other investment properties, we were happy to deliver funding.

Landlords need to be on the right side of the rules

Buy-to-let investors need to ask themselves several questions throughout their investment journeys, but this is especially true for HMO landlords. Where the complicated world of HMOs risks hitting investors, we’ll be there to keep an investment afloat while solutions are found.

Our funding is flexible and can adjust to a range of potential problems. If an investor sees their progression put on hold due to missed payments in their history, or if they need to fix-up an HMO property quickly before they can rent it out – we may be able to help.

Landlords of all shapes and sizes will play a crucial role in the property market over the coming years. We’ll be there to support them every step of the way.

FAQs

What are the advantages of bridging finance for HMO landlords?

HMO properties often require upgrades to meet local licensing standards and maximise rental yields. However, high street lenders can be reluctant to fund properties that need significant work, especially if tenants are still in place or there’s a change of use involved. At Market Financial Solutions, we understand that refurbishment is key to adding value. Our bridging finance can give landlords the upfront capital they need to improve their HMOs without waiting for long-winded mortgage approvals. It can be tailored to their circumstances with direct access to the underwriter so HMO landlords can take up opportunities when they arise.

How can you ensure a speedy process?

Timing was crucial. The landlord needed to complete essential works to comply with HMO regulations and boost rental income. We began underwriting from day one, reviewing the refurbishment plans, property details, and the borrower’s exit strategy upfront. This proactive approach meant funds were released without unnecessary delays, helping the landlord avoid income gaps and regulatory penalties.

Why is flexibility important when funding HMO upgrades?

Every HMO refurbishment is different. Some projects are minor upgrades, while others involve extensive layout changes or licensing adjustments. We make sure to understand the scope of work and the landlord’s longer-term plans. We tailored this facility around the borrower’s timeline, ensuring they had enough breathing space to complete the works and refinance once the property was improved. It’s this flexible approach that makes us a trusted partner for landlords and investors.