PROPERTY DEVELOPMENT FINANCE SCENARIOS
Here are some recent examples of property development finance deals we have arranged for clients.
NEW DEVELOPER
CUSTOMER PROFILE
Mr Borland is a builder, looking to buy a plot with Detailed Planning Permission on which to build a four bedroom house. He runs a successful building company with his wife and is looking to branch into property development. They are looking to set up a new LTD company that can be used for this development and for further developments moving forward.
Land purchase/value £200,000
Build costs £240,000
End value £750,000
CURRENT SITUATION
Mr Borland has a team of trades that work for him which he will be able to use on his own development. He is able to pull together £80K out of his business/savings. He also has trade accounts that he will utilise in building out the house. The building company he runs has been established for just over 15 years. Mr Borland will be managing the build as the main contractor. The build time has been estimated at 6 months and will be sold on completion.
Mr Borland has sufficient deposit to purchase the land but not any funds to start the work, however, he owns a buy to let property with a market value of £350,000 with an outstanding mortgage of £80,000.
THE SOLUTION
With a second charge on his buy to let property as well as a 1st charge on the one he’s buying, BuildLoan can raise enough to help the client buy the site as well as fund the build costs minus client’s £80,000 contribution.
The client is offered a loan of £360,000 provided in stages over a 6 month term with a fixed interest rate of 1% and a 2% arrangement fee. No early exit or early repayment charges. There were also professional fees, including valuation and legals.
GARDEN PLOT
CUSTOMER PROFILE
Mr and Mrs Ritchie own a garden plot. The title is split from their main residence, therefore, the land is unencumbered. The plot has detailed planning permission to build a similar house to the one they currently live in, next to the plot.
Land value £100,000
Build costs £130,000
End value £345,000
CURRENT SITUATION
Mr and Mrs Ritchie have no development experience. He works as a shop manager on £56,000 and Mrs Richie is a financial adviser earning £34,000. They have sufficient savings to cover professional fees but nothing to go into the build.
The couple want to develop out the property and sell it once completed, using the sale proceeds to pay off the debt and their own current mortgage. They will have one main contractor who will manage the project and will be on a fixed price contract and build time has been set at 6 months.
THE SOLUTION
BuildLoan was able to offer 100% on build costs with advance stage payments and up to 60% net of the project’s value at any stage.
Based on the land value of £100,000, BuildLoan was able to provide up to £60,000 on day one. The clients only required £30,000 to start the project with further funds released during the build based on the clients build schedule. As interest is applied on the funds drawn down, the clients were only charged interest as the funds were required. There were also professional fees, including valuation and legals. The case was completed and the first £30,000 was released to the clients within four weeks.