Investor/bank needed for property project, ideas?
Discussion
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.
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 said:
abandoned vacant commercial building
doesn't currently have planning
£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.
You're looking at quite an unattractive asset, for a project with the main hurdle as yet unaddressed, and wanting to tie up £200k for a year, then reckon on having an average of 75k more out.doesn't currently have planning
£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.
50k return may sound like a lot but, against that profile, sub-20% probably won't look that great to an investor (and that's assuming it got delivered on time and you were actually able to complete the purchase).
sidekickdmr said:
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.
how much equity have you got in your house?Just keen not to loose this property and wondering if there is any way too secure it.
The proposed return wouldn't be enough for anyone I can think of and even a "normal" bridging loan will be around 1% pcm.
sw
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?
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 said:
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?
I really can't see it happening. Lending will be prohibitively expensive if available at all.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?
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.
sidekickdmr said:
However I can't see how the land/location is worth less than 200k even without planning, so the asset is secured.
If you take security, you don't want to be locked in for a long time if you find yourself in a position where you need to get out of the transaction.The property might be worth 200k to the right buyer, but how much would you need to drop the price to have it sold (actually sold NOT a deal in principle) within a few weeks?
The fact that you can't get a mortgage on it suggests that the market is limited (i.e. you'd need to shift it to another cash buyer), which obviously wouldn't help.
Lenders prefer to be over collateralised for a reason...
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.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.
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 said:
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?
To be blunt, no, not a hope in hell.A gamble for an investor is one thing but your proposal is not attractive in the slightest.
Spudler said:
To be blunt, no, not a hope in hell.
A gamble for an investor is one thing but your proposal is not attractive in the slightest.
This unfortunately.A gamble for an investor is one thing but your proposal is not attractive in the slightest.
Only people that may be interested are the new resi development finance lenders but then they operate on a typical deal size of £0.5m+ and charge high rates.
Given the initial lack of deposit, poor quality security, no comfort in planning etc. it is not going to work for almost all lenders.
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.
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.
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)Planning can never be relied upon and your sale isn't even exchanged.
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
In basic terms, you need security, but you don't have it. If you are willing and able to secure the entire risk against an asset it opens up lots of doors as suddenly someone is able to judge what they might get back if everything goes wrong.
But whilst you are willing (as are most people when they see a good deal), you are not able. So there is no security.
Sounds like you should just hope no-one else has the same idea and it doesn't sell, or if it's worth more than market value for you personally, and goes for less than you'd pay, you could buy it off the buyer who might like the short term profit.
But whilst you are willing (as are most people when they see a good deal), you are not able. So there is no security.
Sounds like you should just hope no-one else has the same idea and it doesn't sell, or if it's worth more than market value for you personally, and goes for less than you'd pay, you could buy it off the buyer who might like the short term profit.
Just a couple of observations:
It seems a bit strange that the estate agents would pull it from the auction - maybe they don't expect it to reach £200.000 - so you may be better off at the auction?
Have you researched this property? Friend of mine bought something similar 3 years ago. As soon as they started demolition work they found -
Asbestos - both in the building and dumped (buried) in the grounds.
A leaking underground oil tank which meant that all the soil had to be dug out and replaced.
He's not a happy bunny.
It seems a bit strange that the estate agents would pull it from the auction - maybe they don't expect it to reach £200.000 - so you may be better off at the auction?
Have you researched this property? Friend of mine bought something similar 3 years ago. As soon as they started demolition work they found -
Asbestos - both in the building and dumped (buried) in the grounds.
A leaking underground oil tank which meant that all the soil had to be dug out and replaced.
He's not a happy bunny.
sidekickdmr said:
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)Planning can never be relied upon and your sale isn't even exchanged.
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
I had a £300k mortgage on my old £400k home.
I built a new house next door, larger with NHBC warranty etc
I was told my mortgage was transferable and that I was pre approved.
It turned out that they ONLY transfer a mortgage when you buy it - you are not allowed to build it.
Pre approved - meant nothing I'd still have to apply and as I'd spent the last year building it I hadn't earnt any money.
Hence we have the situation where I was a good risk with an old £400k house but now I'm unmortgageable with a new £500k house.
Don't try to use common sense where banks are involved.
sidekickdmr said:
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?
The biggest problem you have is that the return you're offering is nowhere near high enough given the risks involved. It's easy to look at 50k and think that it is a decent return but you need to remember that even a supposedly simple investment needs due diligence and management (all of which incur costs/fees that will reduce the net return). And there are lots of other ways of investing that sort of money without the hassle associated with a private project.
Is the planning as straightforward as you think? It seems unlikely it wouldn't have occurred to the vendor or agent that it would be worth more with consent for changed of use.
There are many on here more experienced than me, but in my experience if it's in the countryside the fact that it has other houses around makes no difference. In the case of my neighbour it had the reverse effect, planners said they didn't want further residential density in an overdeloped area of countryside.
There are many on here more experienced than me, but in my experience if it's in the countryside the fact that it has other houses around makes no difference. In the case of my neighbour it had the reverse effect, planners said they didn't want further residential density in an overdeloped area of countryside.
Why not you go to the original seller and see if you can secure a delay in the auction date while you work through planning.
You may be able to secure an exclusive period of say 3 months for you to get your stuff together , you may need to pay the seller a non refundable deposit say of 5% (£10k) to make this happen.
This (to me) seems the easiest lowest risk approach, for all involved.
I have lent monies a couple times on deals like this, the demanded return ranges from 1% to 2% a month and at no point is my potential "bail out return" less than the principle amount lent.
The way I see it (simplistically) any potentially buyer of that property could loose £50k in a year, through buying & selling fees, lost bank interest, failed planning (resulting in having to push it back through the auctions at as much as 20% discount etc). The upside therefore probably needs to be about £100k to make it attractive.
However if you were to put say £25k into buying the plot (with an investor) you suddenly half their downside risk, therefore a £50k return becomes more sensible.
You may be able to secure an exclusive period of say 3 months for you to get your stuff together , you may need to pay the seller a non refundable deposit say of 5% (£10k) to make this happen.
This (to me) seems the easiest lowest risk approach, for all involved.
I have lent monies a couple times on deals like this, the demanded return ranges from 1% to 2% a month and at no point is my potential "bail out return" less than the principle amount lent.
The way I see it (simplistically) any potentially buyer of that property could loose £50k in a year, through buying & selling fees, lost bank interest, failed planning (resulting in having to push it back through the auctions at as much as 20% discount etc). The upside therefore probably needs to be about £100k to make it attractive.
However if you were to put say £25k into buying the plot (with an investor) you suddenly half their downside risk, therefore a £50k return becomes more sensible.
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