Transforming a residential property for rental in Milton Keynes

Finance: £270,000 | Location: Milton Keynes, Buckinghamshire

A mother and daughter have built a small but successful rental portfolio over the past six years. With four properties already under their belt, they aimed to purchase and refurbish a dilapidated detached property in Milton Keynes to expand their buy-to-let (BTL) portfolio further. To finance this project, they required a £270,000 bridge loan to purchase the £325,000 property, which included £60,000 for the necessary property refurbishments. 

Arial view of properties in Milton Keynes

Overcoming financial challenges with a bridging loan

The primary challenge faced by the pair was that two properties in their portfolio were already highly leveraged. However, combining the available equity in the other two enabled the pair to raise an accumulative £270,000 by way of two second-charge bridge loans

This, together with cash savings of £73,000, covered the fees, SDLT tax, relevant planning permission and property purchase. The shortfall for the refurbishment work was financed through a 3rd £60,000 property refurbishment loan on the property itself, with a Loan-to-Value (LTV) ratio of just a little over 20%.

Bridging finance was required due to the property being unmortgageable, which prevented the mother and daughter duo from refinancing onto a BTL mortgage from the get-go.

Buy-to-let opportunities in Milton Keynes

Milton Keynes is one of the fastest-growing cities in the UK, with 13 people moving to the area a day. VeriSmart's research also identified Milton Keynes as one of the UK's top ten most sought-after rental property locations, surpassing London.

High rental yields: Based on an average rent of £1,800 for a 4-bed detached property in Milton Keynes, the typical yield expected for the property would be around 6.6%. This offers a tangible financial incentive for those contemplating investing in Milton Keynes.

Potential for capital appreciation: The average house price in Milton Keynes is £321,455, marking a 20% increase over the past five years. The increase in house prices demonstrates a substantial growth rate, making it an attractive location for property investors. 

Economic significance: Milton Keynes has continued to grow over the years by 15.3% from 248,800 in 2011 to 287,000 in 2021 - this far surpasses the general growth rate for England, which stands at 6.6%. Milton Keynes consistently attracts businesses in the tech industry, drawing in other innovative businesses and earning a reputation as the Silicon Valley of Europe. 

In addition to companies such as Amazon, Mercedes Benz, and Unilever, thousands of businesses offer employment opportunities across various skill sets and salary brackets.

Transport links: Milton Keynes is positioned nearly equidistant from London, Birmingham, Leicester, Oxford, and Cambridge. The city centre is also just 5 miles from junction 14 of the M1. Milton Keynes provides a 36-minute commute to Euston; it stands out as one of the prime investment destinations for commuters.

Prime opportunity in the form of a 4-bed detached property in Milton Keynes

The early 90's 4-bed detached property is situated within a popular village in Milton Keynes and had a market value of £325,000. What made this property purchase attractive is its sheer size; there's a lot of open space living, a large garden, a double garage, part of which had been poorly converted into living accommodation, and a large conservatory.

While the property was structurally sound, substantial refurbishments were necessary:

  • Demolition of granny annexe cost: £3,000
  • Garage construction: £23,000
  • New combi boiler and vintage column style radiators: £5,700
  • New high-spec kitchen and installation: £22,000
  • Moving internal walls to create open plan living area: £2,600
  • Replastering and redecoration: £3,000
  • Garden landscaping (deck construction and turfing): £1,700

Despite being structurally sound, the 30-year-old interior required significant refurbishment, and the property was considered uninhabitable.

The property's expansive size was also the reason for such a high refurbishment budget, which included knocking down a garage-come-granny annexe attached to the property and building a new garage, moving internal walls, installing a new kitchen, bathroom, new boiler and radiators, replastering and redecoration throughout the property including bedrooms, and landscaping. 
The bridge loan not only covered improvements but also made the property mortgageable.

Profitable exit with buy-to-let refinancing after successful refurbishments

Once the refurbishments were completed, the duo were able to refinance onto a buy-to-let mortgage, which saw an uplift in property value to £600,000. 

The pair were then able to repay all three bridging loans and left them with upwards of £200,000 of equity in the new property.

Gaining financial insights on bridge finance for buy-to-let investments in Milton Keynes

Engaging with a specialist bridging loan broker comes with several benefits and can prove advantageous for borrowers. 

Brokers frequently secure more favourable rates compared to direct negotiations with lenders, and in this case know which lenders to approach for quick second charge bridge loans.

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