A couple had set their sights on acquiring a farmhouse with land and outbuildings near Bath to transform two barns into long-term lets with the further potential for creating a holiday park generating multiple revenue streams. The plan also involved refurbishing the main building - the farmhouse as their main residence.
The couple, approaching retirement, had decided to liquidate their property portfolio, which stretched throughout two counties, and instead establish an easier-to-manage property investment opportunity.
The estate they looked to purchase totalled £1.2 million and included a large stone-built 3-bed farmhouse, traditional detached barn, detached former stable and 6 acres. Due to the dilapidated condition of the farmhouse and outbuildings, the couple looked to secure the estate at a much lower market rate.
The short-term bridging finance was used to secure the asset and provide the necessary time to divide the titles, refurbishments, and obtain planning permission (Class Q) - while awaiting the sale of their substantial property portfolio.
- Acquire the farmhouse property near Bath with ample land and outbuildings
- Repurpose/convert the barns into long-term buy-to-let properties
- Obtain planning permission for the barn aspects of the project: conversion to residential property
- Divide the property into three titles: the farmhouse and the two barn conversions
The total property estate had an estimated value of £1,200,000, and with £410,000 in cash towards the property acquisition, fees, and SDLT tax, the total finance requirement was £860k (equating to a loan-to-value (LTV) ratio of 79%). The higher LTV meant the borrowers needed to additionally leverage two of their existing BTL properties as extra security by taking a charge on those properties to obtain the required funding.
Whilst the couple could have refinanced the barns upon the completion of their conversion with separate buy-to-let mortgages, this wasn’t required as the sale of their existing property portfolio was completed within 6 months. It made better financial sense to exit the bridge loan facility with the sale proceeds, saving them significant costs in interest.
A barn conversion is the modernisation of agricultural or industrial structures, such as barns, granaries, stables, and warehouses, often found in rural areas. These buildings may have fallen into disrepair or become obsolete due to changes in farming or manufacturing practices.
Rural locations: Barns are typically located in rural or semi-rural areas, providing a peaceful and picturesque setting. This can appeal to tenants looking for a quiet lifestyle away from urban areas.
Demand for unique housing: There is a growing demand for unique and non-traditional housing options. Barn conversions offer something special for tenants seeking a lifestyle home - something hard to come by from standard housing stock.
Potential for profit: While the initial investment in converting a barn can be significant, it can add substantial value to the property if executed well. This profit potential can make barn conversions an attractive option for investors.
Adaptability: Barns can be adapted for various uses, such as residential, commercial, or mixed-use spaces. This flexibility allows investors to target different markets and adapt to changing trends or demands in the property market.
Government incentives: In specific regions, certain planning authorities may restrict new construction, opting instead to endorse the revitalisation and conservation of existing structures, particularly agricultural buildings.
The short-term financing facilitated property acquisition, title division, refurbishments, and obtaining planning permission. Despite the complexities of repurposing structures and securing permissions, the conversions were completed and the exit was achieved via selling their previous portfolio.
Looking ahead, the couple plans to further diversify their income by securing finance for the unencumbered land. Utilising holiday park development finance and envisioning the construction of the park as a future investment opportunity.