We recently assisted clients who were seeking a funding solution to refinance an existing bridging loan and facilitate the redevelopment of a former care home into a 53-bedroom House in Multiple Occupation (HMO). This development would unlock the asset's full potential, significantly increasing its rental yield and market value.
The Client:
Our client is a property developer, who we had been introduced to help them acquire a closed care home. They specialised in repurposing underutilised assets and developing them into high-yielding residential investments. With a keen understanding of the local rental market, they identified an opportunity to create a premium HMO offering in a prime location near the local hospital and key amenities.
The Situation:
The client had acquired the vacant care home with no planning in July 2023 for £1.2, using bridging finance arranged by us. Their vision was to convert the 11,751 sq. ft. property into a high-specification HMO comprising 53 bedrooms. They have since achieved planning permission and a valuation of £2,255,000, which the valuer had been able to confirm with the planning permission. To realise their plans, they required a tailored funding solution that would enable phased drawdowns to align with the project's key milestones.
Our Solution:
To support the client's redevelopment objectives, we structured a flexible drawdown development bridge, which would enable the client to make the most of the enhanced value of their asset whilst avoiding unnecessary fees to change product. The total loan amount of £1,450,240 included an initial advance of £975,000, which would enable the client to repay the existing bridge and begin work on the new development. Additional funds were scheduled to be released in tranches based on project milestones. The loan was provided on a 12-month term at a competitive rate, with fully retained interest. By implementing a drawdown facility, the client could efficiently access capital as needed, ensuring smooth progress throughout the development. This tailored approach not only met the immediate refinancing requirements but also provided ongoing financial support to drive the project's completion.
Benefits & Results:
Our solution enabled the successful transformation of the property into a high-performing HMO, unlocking its full potential. With a projected gross rental value of £384,200 per annum and a net rental income of £306,576 per annum after running costs, the investment delivers a strong return. The net yield upon completion is estimated at 8%, highlighting the viability of project. Additionally, two tranches were drawn down totalling £275,00 which enabled the work to progress swiftly, ensuring the project remained on track and met all necessary compliance requirements. By leveraging specialist finance, the client effectively maximised their investment while contributing to the local house market with high-quality rental accommodation.
This case highlights the importance of flexible structures and strategic planning to align with local authority regulations, maximising the value of repurposed properties.