Ryan came to me in August last year with a property he wanted to convert to an HMO. It easily converted to a 6 bed but had an option as a 7 bedroom with a rear extension. He didn’t have planning before the purchase, and only had funds available for the 6-bedroom option due to other commitments.

So we had to think outside the box a bit!

Stage One

The first part was simple; we arranged a bridge for the purchase of the property with the intention of converting it to a 6-bedroom HMO. Ryan had the funds for this, and it didn’t require planning so the lender was happy too. We were able to lend 75% of the purchase price and Ryan funded the refurbishment.

Stage Two

When the refurb was almost finished, planning was approved for both the rear extension and the change of use to a 7-bedroom HMO.

We used the same lender as the original bridge to refinance into another bridge to raise funds for this. This meant a reduced arrangement fee, valuation, and legal costs. It allowed the client to raise an additional £80,000 for the work (and also gave him the deposit to purchase another property!)

Stage Three

Another big advantage of this structure is that the lender could see that the client had followed the correct process. Ryan didn’t push the boundaries of what you are allowed to do on the original bridge and therefore wanted to keep him as a client.

Through the relationship we have with this bank, we were able to ensure the refinance was a smooth process with the same lender. Again this meant a reduced arrangement fee, valuation, and legal costs. We were able to lend 75% of the market value, and use a commercial valuation.

Summary of the numbers:

Purchase price £135,000

Initial refurb cost: £85,000

Valuation at the first refinance: £260,000

Additional refurb costs: £30,000

End value: £300,000.

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