Raising development finance

[lrdisco]

I own 20% of a piece of land which are applying for outline planning at the moment. The Land is in the local plan for residential development. We have a layout for 38-40 2&3 bedroom properties with 10% affordable housing.
My background is as a builder/ small scale developer and I worked as a site manager in high volume housing about 20 years ago. No problem with any of the site stuff or office side of things.

My issue is where to go for development finance. I’ve looked at Google but I get the feeling I will get my leg lifted financially.
Any ideas or contacts would be greatly received eg is there any chance on p2p lending?

[anonymous-user]

• Who owns the other 80%?
• Limited company?
• How much cash are you trying to raise?
• Do you own e.g. a house to offer as security for a loan?
• Total cost of project?
• Timescale?
• Expected profit?

[lrdisco]

rockin said:

* Who owns the other 80%?

• Limited company?
• How much cash are you trying to raise?
• Do you own e.g. a house to offer as security for a loan?
• Total cost of project?
• Timescale?
• Expected profit?

1/ Family but I’m buying another 40%.
2/ £2,000,000 over 24 months.
3/ £3,400,000
4/ 36 months
5/ £1,400,000-£1,600,000

Edited by lrdisco on Saturday 23 December 17:30

[anonymous-user]

lrdisco said:

1/ Family but I’m buying another 40%.

Those are big numbers for normal humans.

The rest of the family are selling out. The best thing is for you to do the same.

Sell the project to a developer once planning permission has been granted.

[BeefMaster9000]

interest rates are quite high, but seen borrowing for similar projects here

[Condi]

Cant Sarnie help? I would have thought a good mortgage broker would at least have contacts able to finance something on that scale, even if its just a case of putting investors with the builder.

[anonymous-user]

Sounds to me as though the biggest problem for OP is that he's got very little to offer as security. Financing this one from a standing start looks tricky, not least because a house is worth very little when it's a quarter built, half built or three quarters built. The real "added value" only kicks in once a house is 100% finished and saleable to a happy family.

Essentially lenders are being asked to take equity risk in exchange for an uncertain and limited return, which is out of balance.

[Yipper]

Dragons' Den.

Or a VC party in London.

[ben5575]

Be helpful to understand your appraisal in more detail as the figures you've posted don't make sense to me. You've missed a lot of cost out of that, either for brevity or your appraisal's wrong.

Edited by ben5575 on Sunday 24th December 09:28

[lrdisco]

Thanks for the responses. I have not done my full cost breakdowns yet and a lot of the figures are ball park but the local Estate agent has given me some guidance.
I know it would be easy to sell my part of the Land as a whole to a large developer but where’s the fun in that. I like a risk and a challenge. If this goes ok I can retire.
The Land is cheap in East Yorkshire but the market is buoyant.

I’m speaking to a financial advisor/ mortgage broker next week about this.

[ben5575]

Sounds like development in east yorkshire is easy then 40% profit as well. Impressive...

You may like risk but unfortunately for you, banks and people with money don't. Or if they do, they want a very large chunk of it back in return.

A financial advisor/mortgage broker is not going to be of any use to you on a 40 unit scheme. All I can say is have a proper think about this before it becomes the inevitable car crash it currently looks and sounds like.

At the risk of encouraging you; these guys are about the cheapest equity you will find (please let me know if anybody has found cheaper!) http://www.housinggrowth.com/ . It's a relatively simple model, explained clearly on their website. It is a legit fund established between Lloyds Bank and the HCA. You are required to put in 10% of NDC - either cash or land value, so may suit this situation. The SPV then raises the senior debt privately.

You can access debt finance through https://homebuildingfund.campaign.gov.uk/. Again, this is competitive finance and they are more inclined to take risks/support smaller developments to encourage housebuilding.

Unfortunately you can't access both together otherwise you'd be able to lever huge profits off a nominal 10% investment. All supported of course by Help to Buy at the exit as well.

[anonymous-user]

Fundin circle, ablrate etc could do it but investors won't like your lack of history managing a project like this.

[JulianPH]

Hi Nick

Try www.largemortgageloans.com

They do this kind of borrowing quite frequently.

Any joy on my skimmer covers...?!

Happy Christmas mate