Many thanks for the replies, the opportunity to discuss this is very helpful.
Gordon, I would take the money to buy the properties from the cash and investment portfolio. I got the idea that rather than take the money out and sink it into the works, I could finance the works for the same cost via buy-to-let investment and come out ahead. But I don't know whether that actually makes sense..!
The investment portfolio is not income-oriented and is running a loss at the moment; I think of the money there as parked long-term. The biggest holdings are broad-based ETFs (Schwab US Large Cap Growth & Value, Vanguard FTSE Europe ETF, iShares MSCI United Kingdom ETF); I'm not weighed towards dividends.
I don't believe that I could do well actively managing an investment portfolio to generate income. I'm more confident that I could 'actively manage' a few apartments, in the sense of doing short-term lets in the summer, etc.
I can't take a tenant in at the moment, as the house doesn't have a suitable room. Anyway, as I don't have an income at the moment, income tax relief is not something I'm looking for. But I do expect to let out a part of the house when the renovations are done.
MrEarl, thanks for that, I hadn't heard of Dilosk. They are not lending yet but I will talk to them later in the week to see if anything would be possible there.
And daddyman, yes, you've summed it up! I would try to make the case that it's relatively low risk for the bank, based on the assets remaining, my earning prospects, etc.