Finance for Scottish developers renovating uninhabitable homes

12-July-2019

12-July-2019 11:23

in Bridging

by Jennifer Stevenson

The scandal of dilapidated houses standing empty while families are homeless is a source of great frustration to developers keen to buy them up, fix them up, and sell them on.

A castle or a substantial country house in Scotland that’s fallen into a sad state of disrepair might have a number of profitable futures as a boutique hotel, luxury retirement apartments or a wedding and conference venue.

But more modestly priced homes for families, and especially ex social housing, can struggle to find buyers at a sale price that allows for a reasonable return on major renovation costs.

Especially if there are purchase conditions that require that the finished property should remain as socially affordable housing.

Development opportunities in Scotland

In Scotland in particular, many developers are aware of the range of derelict property renovation opportunities across the country. In 2019 there are 39,000 long-term empty homes across the country.

Which is where buy-back schemes introduced by the Scottish government, and local authorities north of the border, are offering encouraging support and opportunities for developers.

Bridging finance is the solution for derelict property renovations

Long-term mortgage finance isn’t available for short-term flip-and-sell projects
Derelict properties considered “uninhabitable” by lenders (in need of major structural repairs, and/or without a functioning bathroom or kitchen) are not eligible for mortgage finance
Properties bought at auction need bridge finance which can be set up within the 28-day payment deadline post hammer-fall

The cost of owning an empty property

There are strong disincentives for long-term owners or developers to have residential properties standing empty and falling into disrepair.

Mortgage payments: repayments on an interest-only mortgage for on the national-average priced UK property empty property: approx. £510 a month on

Council tax: since 2017’s clampdown on “buy-to-leave” landlords (chiefly the glittering empty new-build highrises across the London skyline) landlords of properties that have been empty for more than two years will have lost their council tax exemptions, in fact will be paying a 100% premium on their council tax.

Insurance: most insurance policies have a clause which voids the policy if the property is empty for more than 30-60 days. And there’s an increased risk of vandalism and theft of fixtures and fittings when a property is obviously empty.

Maintenance costs: small leaks can become major damage, and a badly overgrown garden can cost thousands to get back into order.

Identity theft & fraud: the risk of fraudsters assuming the identity of the owner of a property, and then actually financing or selling it without the true owner’s knowledge is greatly increased if the property is:

- Unoccupied

- Mortgage-free

- Not registered with HM land registry

- The owner lives overseas

(You can track changes on the register if you believe your property to be at risk: sign up to get register alerts.)

New finance offers

One new entrant to the property finance market in Scotland, Westgate Private Finance, is enthusiastic about the opportunities in the uninhabitable refurb market.

Westgate offers a “fix and flip” loan product targeted at properties with purchase prices between £110,000 and £160,000.

They will fund up to 100% of renovation costs in advance stages, with a maximum LTV of 80%.

Renovation of derelict Scottish homes

A well-connected specialist finance broker such as Clifton Private Finance, has access to other independent lenders who take a similarly entrepreneurial view.

Westgate’s CEO Adam Davies describes the Scottish government’s Empty Homes scheme as an “amazing” initiative which he says is making the Scottish market “appealing”.

Councils across Scotland have used the council tax surcharges on empty homes to help fund the scheme, which funds an advice scheme and a network of district council Empty Homes Officers.

Buy-back schemes

Scottish councils also run a variety of buy-back schemes to help to get this dormant property resource back into the market.

Falkirk Council is actively looking to buy former council properties, with up-to-date Home Buyers reports

Perth and Kinross Council is actively looking to buy back ex-local authority properties, cottages and ground-floor properties

South Ayrshire Council offers support with identifying empty properties for sale, and interest-free renovation loans from its Empty Homes Loan Fund

North Ayrshire Council offers similar support, interest-free loans and a buy-back scheme for properties in areas of high demand

Contact us to arrange purchase and renovation finance for derelict Scottish properties

As specialist property finance brokers we can arrange competitive short-term bridging loans from entrepreneurial private lenders and banks, to help you purchase and renovate empty, unmortgageable properties. Call us to talk about your plans and the kind of borrowing you need: