Landlords warned for using short-term finance to fund improvements



UK property investors have been warned about using risky finance, after it emerged that a number of landlords are undertaking refurbishments using credit cards or short-term finance.

Worryingly one in five (19%) landlords funded recent refurbishments with credit cards or short-term finance, Shawbrook’s ‘Changing Face of Buy to Let report’ found.

John Eastgate, managing director, property finance at Shawbrook Bank, said: “Ensuring that properties are up to a good standard and meet the current demands of tenants is a mark of a responsible landlord, however, it’s important that landlords are not putting themselves at risk financially in order to undertake this work. Unsecured short-term finance products like credit cards can come with high interest rates which could leave landlords with substantial debt.

“There are other finance options available to landlords which can often be less well-known but a suitable alternative to short-term credit or using personal savings. For example, a second charge mortgage can be a good option for landlords looking to refurbish. We’d encourage any landlord considering a renovation to speak to their broker about their options before putting it on a credit card.

“Renovating your properties can help attract more tenants, secure higher rents and boost the value of the property, but don’t do so at the expense of your own financial security.”

Landlords have been proactive in improving their homes in the past year.

Three in five (62%) have refurbished one of their rental properties in the last 12 months, with 18% renovating more than one rental property.

Landlords typically spent over £13,000 on refurbishments in the past year.

Repainting the property (37%), new carpets and flooring (28%) or adding in a new kitchen (27%) or bathroom (27%) were the most popular renovations

Three in five (60%) utilised their personal savings or investments to pay for works, and 12% using a recent inheritance or windfall.

Making improvements to a rental property can pay off, as most tenants say they would pay more in rent if their landlord made improvements to their property.

For example, a quarter (24%) said they would be willing to pay more if their landlord installed a new kitchen, and 20% said that a new bathroom would be worth paying more for.

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