Investor/bank needed for property project, ideas?

[sidekickdmr]

Hey guys,

Ok so our house is under offer and is soon to be sold, we are looking at a couple of properties but noting is really taking our fancy at the moment (we are after something quite unique/special) so looks like we may have to move into rented and be ready to pounce on something when it comes up. Perhaps consider building or converting a property while living in rented, would LOVE that.

However, today I spot a new property has come on the market, its an abandoned vacant commercial building and comes with about 3 acres of land, lovely countryside setting etc.

The issue is, because it doesn't currently have planning, none of the high street mortgage or specialist self build lenders will lend on it.

There is nothing else this building could be, its in the middle of nowhere and on its own, surrounded by residential properties, so im sure residential planning wouldn't be an issue.

The property is £200,000, and I reckon conversion costs will be about £150,000.

We have a sizable chunk of equity tied up in our house, but wont see this for a few months.


So, im thinking, if a bank/investment company/private investor could lend £350,000, in stages, £200,000 for the property purchase and the remaining £150,000 released in stages of the build.

When complete we would then be able to get a mortgage and purchase the property off them, completed for £400,000 - so £50,000 profit in 12 months with the security of an asset along the way. (i understand costs can change along the way, we could always agree a % margin or something)

I understand this would require quite a watertight legal contract, but cant see that being an issue.


Any thoughts on the above, or any better alternative ideas?

Just keen not to loose this property and wondering if there is any way too secure it.

[sidekickdmr]

Yes good point re them taking all the risk.

Issue is all my equity is tied up in the house and would need to secure the property in next 2 weeks.

I could happily move into rented and by the time planning is sorted I could fund the £150k conversion costs myself.

So basically need someone to buy the property to be sold back to me for more later.

I understand the risk for the investor, someone buys it, and for some reason it can't get planning (but really can't see why it would be an issue), the asset is worth less.

However I can't see how the land/location is worth less than 200k even without planning, so the asset is secured.

Make sense?

[sidekickdmr]

desolate said:

I really can't see it happening. Lending will be prohibitively expensive if available at all.
I **THINK** recent changes to planning mean you can convert to residential very easily without going through a planning process so that should speed it up.

In theory you could use 100 of the 150 equity as a deposit : spend 50 to get it habitable then apply for a normal mortgage to finish off.

If i could i would just use the equity from my house and loan myself upto the eyeballs to get it, however its off to auction in 3 weeks and the EA have indicated they they would do a deal and pull it from the auction.

Therefore this needs to be secured in the next 2 weeks or so, we have about 120k equity in our house but wont be seeing that for about 2/3 months.


So basically, nobody can think of a way this is possible, wether it be highstreet banks, or private investors with a knowledge of the market/planning?

Its just SSOOO perfect, just a couple of months too early

[sidekickdmr]

Even if I paid for all of the planning process (architects, plans, application process, planning consultants, appeals etc) AND signed a contract stating that I would buy the building back off them once planning had been approved for £250k? The process may only take a few months.

I could even take the investor along to a pre application planning meeting with the council and get feedback on the plausibility before they have spent a single penny.

Bummer

Back to the drawing board then.

[sidekickdmr]

V8RX7 said:

The problem being you don't have £250k so the contract is worthless

Planning can never be relied upon and your sale isn't even exchanged.

Valid points, we do however have a mortgage agreed upto 500K and when the building has panning on it we have been told we can mortgage it no problem (through buildstore)

And even if for any reason what so ever we couldn't buy it, with planning it would be worth more like £270-300k so they could just sell

Anyway, im not being purposely awkward here, just trying to understand and think outside the box a little.

Really appreciate all the replies

[sidekickdmr]

Thanks so much for the replies all, really helpful in understanding the process and expectations.

Anyway, I don't know if this changes anything but I have sight of a official council pre application response letter, which within this letter they say that conversion to residential is "suitable for its use and most likely" this is a very detailed letter in which they pass comments on the type of work they will be happy with and which features they are keen to retain etc.

Would the above change anything?

[sidekickdmr]

NNH said:

If you can put together income or assets that put you into "private banking", you may find it's easier to get this kind of one-off loan reviewed by a person rather than a computer. For my employer, household income of 100k or assets of 1m would probably do it.

Well we hit the income bracket, not the assets though

Anyway, looks like I'm going to have to let this one slide for now, when the house is sold and money is in the bank I will drop them a letter and see if they will consider selling, otherwise I'll have to let it go and just hope something similar comes up in the future.

[sidekickdmr]

desolate said:

With that sort of income I would at least give it whirl - ring round a few mortgage brokers and max out.

You may well get a bridge loan.
Eye waveringly expensive if there is a delay.

Or ring the vendor explain your situation honestly make an offer and see if they will wait.
Then you can rent a cheap house nearby whilst you get it habitable.

Going back to the first page, mortgage company/bridging loans won't cover without planning permission.

If it had it already I could get the finance no problem, annoying

[sidekickdmr]

jonah35 said:

You want everything but have nothing in return.

Why not borrow £10million to buy a £3m plot of land and build lots of houses on it.

Let the bank lend you all the cash.

What development experience do you have?
What other properties or assets could they secure the loan on?
Where is the planning guarantee?

It is far too risky for any mainstream lender.

Id consider lending the money for a guaranteed £50k return in 12 months if you paid all legals and fees so my £50k was net but id want a charge on assets worth an awful lot more than what I'm lending you so if it goes wrong I could sell your other assets quickly at auction to get out of the deal.

Hey, I agree with you, ive realised its not going to be possible in our current situation, I was just hoping someone/a sensible bank/company would be able to use some market knowledge and common sense and be willing to thrash out a deal to secure the place. But seems this isn’t possible with the fact that all of our funds are tied up for another month or two so no financial input available from us.

I spoke to the auctioneers in house finance department and they said they would happily lend 50-60% of the property as it is, so if this auction was in April I would have access to about £100,000 cash, so would have been in a position to actually buy it.

Hey ho, just have to hope for something similar in a few months

[sidekickdmr]

Ok so there is a *chance* that I may be able to get my hands on about £100,000 cash to put into the deal, will know in next day or so.

So I may have the option of using the auctioneers in-house finance department to finance the rest, unless anyone has any better or more financially beneficial ideas of how to raise the extra (will be between £70,000 and £150,000 needed depending on the outcome of the auction) (would only be willing to go up to £250K for it)