More investment and residential buyers are choosing renovation projects, rather than opting for fully finished properties.
Limited turnkey stock, rising demand for energy-efficient upgrades and the long-term investment potential of refurbishments are driving a surge in interest.
That’s the view of Fergus Allen, head of bridging at Clifton Private Finance.
Understanding the appeal of renovation projects
He says: “Renovation projects … give buyers flexibility in a tight market. With fewer move-in-ready homes available, people are looking for ways to unlock hidden value.
“Renovating allows them to create a home that meets their exact needs, while also potentially increasing the property’s market value significantly.
“Energy-efficient improvements are also a key driver. Buyers are more conscious of long-term running costs and environmental impact than ever before.
“Upgrades such as insulation, double glazing, and low-carbon heating systems are often factored into both their budgets and their financing decisions.”
Planning your budget carefully
He continues: “Budgeting is absolutely critical for renovation projects. Buyers … need to consider professional fees, materials, labour and contingency funds for unexpected issues.
“Many underestimate how quickly costs can escalate without careful planning.
“A general rule of thumb is to budget an additional 10-15% on top of projected renovation costs as a contingency, helping to absorb unforeseen problems such as structural issues, delays or rising material prices.
“Knowing what they can borrow, how much equity they have, and how to allocate funds across different stages of the project is essential.
“Getting this right from the start is often what separates successful renovations from stressful ones.”
Investor renovations: renting or flipping
“While owner-occupiers are driving much of the current interest in renovation homes, investors continue to see value in properties that need work.
“For landlords or property investors, renovation projects are often about maximising long-term returns.
“Buying a property to refurbish and rent out, or to renovate and sell for a profit, requires careful budgeting and planning, but the opportunities are significant.
“The strategy differs from someone buying to live in, investors prioritise yields, rental income, and resale potential rather than personalising the space.
Common lender requirements
“Renovation finance isn’t handed out automatically. Lenders want evidence of experience, a detailed budget and confirmation that the property can meet lending criteria after improvements.
“For heavy or complete renovation projects, this often means demonstrating planning permissions are in place, having a structural survey completed and showing contractor availability before funds are released.
“… Light renovation projects don’t carry the same level of scrutiny, smaller works that don’t require planning consent or structural change are often far more straightforward from a finance perspective, especially when bridging loans are involved.
“In those cases, the focus for lenders tends to be on a clear exit strategy, how and when the borrower will refinance or sell, rather than a long checklist of permissions.”