Are you looking at property as an investment?
Considering an auction purchase?
perhaps conversion or development?
If so, do you require funds to complete the purchase and building works?
If you have approached your bank or other mainstream lender you probably exited empty-handed. Some commercial funding may be available on larger projects but only where the applicant has good status and can show experience in development.
All of this is no good to you if you’re looking to buy a property at auction to generate a modest profit following renovation and sale.
Nor is it of any value if you have seen an attractive property that you are looking to convert to a number of flats for a more substantial profit. Fortunately, we have access to lenders that are keen to advance funds for just this type of project.
This is good news for you even if it is your first project, you have low income, income you cannot prove, or a poor credit record.
Our lenders require:
- no proof of income
- no bank statements
- no clean credit history
- no experience in property development
What we can offer
Lending is available at up to 70% loan to value to support a purchase and subsequent sale.
(should you wish to retain the property to receive rental income, long-term funding can be put in place to replace your project funding).
Lending can be put in place swiftly (within 7 to 14 days) which is a key factor if you are to secure a bargain.
Lending is set up on the basis that you do not have monthly interest payments to make during the term of your project.
Renovation project example
Tony and Sarah have identified an auction property that they wish to purchase and renovate. They have set a maximum purchase price of £150,000 and believe they will need to spend £20,000 to renovate, before selling for £200,000.
Tony and Sarah have £70,000 available for the project but cannot raise funding against the property as it is not mortgageable in its present state.
They arrange development finance of £100,000 for a six-month period.
Interest is set at £7,500, and together with other costs the lender is looking for a total figure of £110,000 to redeem the lending once the renovation is complete (Tony and Sarah will pay no interest during the renovation works).
Tony and Sarah complete their project, and sell the renovated property for £200,000 settling their development loan.
Their gross profit is £50,000, against this they incurred costs of £20,000 to renovate and £10,000 for project funding, leaving a net profit of £20,000.
They now have a total of £90,000 available for their next project.
Tony and Sarah were successful with their project because:
- they had a clear budget for their target property
- they had a fixed price cost for their renovation work
- they had full planning permission
- they had architects plans drawn up
- they had a clear timescale
Could you make solid profit like Tony and Sarah?
Development project example
Raj has identified a former NHS clinic which is available for purchase and on which planning permission can be arranged for conversion to a four residence apartment block.
Asking price for the property is £380,000 and Raj has a fixed price for conversion of £200,000.
Each apartment will sell for a minimum of £250,000.
Raj needs to raise £250,000 within 10 days to add to his own funds and secure the property.
His funding is agreed and an offer produced with his gross settlement figure set at £273,000.
Raj completes the project and sells the apartments for a total of just over £1 million leaving him a tidy net profit after development and finance costs of £397,000.
Have you drive and ambition like Raj?
Important points to note
Property development, renovation, or conversion is a commercial exercise designed to generate profit. Therefore funding secured against property in these circumstances is also a commercial transaction.
Standard mortgage rates and mortgage products are not available for these types of projects unless you have other property to act as security, sufficient income that you can prove, and a clean credit record.
As a commercial transaction you should expect to pay fees on application, solicitors costs for both yourself and the lender, and valuation fees.
This is commercial lending to enable you to generate a profit – it is therefore advanced at commercial rates – this is project funding, not long-term funding.
Is it common with these projects for the valuer to document not just an open market value on the property but also a forced sale figure. Lenders can often set their maximum loan to value against the forced sale figure in order to protect their interests.
Your profit on the project is entirely a matter for you and whether you make a profit or loss the lender will expect return of their capital with their agreed interest and costs.
Although a bad credit history is not a barrier to lending, lending will not be available to bankrupts, nor persons that have been discharged from bankruptcy within the past 12 months.