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Self-build project finance

property investment Sep 20, 2019


I have just applied for planning permission for a house that I'm going to live in.  The question is where is best to get a development loan?  I have several houses that I rent out already but I’ve never built a property before.


Development loans are for commercial projects that will be sold or rented out.  When it is for a house that you intend to be your main residence, that all changes.  What you need is a self-build mortgage.

What it is different is that it becomes an FCA regulated loan because you intend to live in it and that is a game changer for several reasons.

Only lenders that have been regulated by the FCA to lend on main residences are allowed to lend to you.  Development finance lenders, by and large, will not have gone through the process of regulation because they only lend on commercially based projects, those that are built for profit.  This means all such lenders are prohibited by the FCA from lending to...

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Thinking about a new build project?

property investment May 20, 2019

If you’ve been growing your property portfolio and have a few conversions and refurbs under your belt, you might like the idea of becoming a developer and building a multi-home project yourself.

You may have been watching Grand Designs, the Big Build and other similar TV programmes and feel ready to tackle a bigger project with homes to either rent out or sell.  However, it’s not as simple as a straightforward conversion.

Firstly, you’ll need specialist development finance - not a self-build mortgage or even a bridging loan.

Almost without exception development finance lenders want provable, documented, comparable experience that the borrower has successfully completed a project similar to the one they’re now seeking to fund.

These lenders have a policy of putting up barriers to entry and this lets them cherry-pick the projects that they see having a high chance of success.  Development finance is not given for ‘on the job’...

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How do you work out the maximum price to offer?

property investment Apr 30, 2019

There is one thing that can seriously dent the profit in any project and that’s overpaying for the property.  An essential part of your due diligence is to work out the maximum you can afford to offer on any property, while still giving you the profit margin you need.

It’s easier to work backwards when doing this.

Start with the end value that your property will be worth once you’ve completed any work that you propose to do to it.  You should be able to find comparable values of similar properties that have sold within the last few months.

The majority of properties that investors buy are flats, terraced and semi-detached houses.  They don’t tend to buy large detached properties in five acres of ground, this means that comparable values are much easier to obtain for these types of property.

If you are buying a commercial property this may not be so easy and you may need to engage a commercial surveyor to get a true current and future value.


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Get the maximum ROI

property investment Apr 20, 2019

Most investors think that the only way to finance deals, when their bank account hasn’t got enough in it, is to joint venture (JV).  To maximise your return on investment there is a JV Pro-Fit Retainer strategy.

Stop giving away 50% of your deal’s profits when you joint venture and, if you do decide to set up a joint venture stay on the right side of the FCA.

  • PRO = Professional – the way you approach your joint ventures
  • FIT – Fit for purpose – ensuring your JV agreements are legal and can’t come back to bite you.

The key thing to remember is that the Financial Conduct Authority (FCA) states that you must only joint venture with someone who is categorised as a sophisticated investor.  That means you need to know about PS13/3 and what constitutes a sophisticated investor and there are seven main criteria for these.

  1. An annual salary of £100K+
  2. Independent assets of £250K+ (not including equity in their main residence)
  3. Employed...
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One building, five flats

property investment q&a Apr 10, 2019


If I buy a property with five flats and then split the titles and try to get 5 BTLs mortgages for the flats: would there be an issue with mortgage providers not being willing to provide mortgages in the same building?


Simple answer - yes. This issue confuses a lot of investors.

  1. You cannot be both freeholder and leaseholder, so the freeholder must be a separate entity to the leaseholder/s. Often this means using/creating a Ltd Co to own the freehold
  2. BTL lenders have over exposure rules. This means they restrict lending in any given block to 20/25% of the total number of flats. In this case, five flats means you will need to find five different lenders
  3. BTL lenders don’t like the same entity owning all the leases in a building.  So having all five leases in the name of the same leaseholder will cause problems.  You may not need five different people on each of these leases, but you will need a minimum of two each owning two or three leases....
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Bridging finance for beginners

property investment Mar 30, 2019

Even at property meets people run in the opposite direction if anyone suggests that bridging finance might be the solution to their financial challenges.  

Other well-meaning investors will advise you not to touch it because it’s too expensive.  They’ll warn you that you’ll lose your shirt - or try to frighten you off with other prophecies of doom.

So here’s a question for you:

Does bridging finance live in your ‘scary box’?  

If you’re an investor that’s never used bridging it probably does.

We all have a scary box and what is in mine are professional people, i.e. solicitors and mortgage advisors who advise people not to use bridging finance.  I find it amazing that people who should be knowledgeable about property don’t understand that, in the right circumstances, bridging finance should be your first choice, not your last choice.

What is it about bridging finance that’s so scary?

It’s perceived...

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The Calculator Close

property investment Mar 20, 2019

When you’re negotiating with the seller of a property you are interested in, don’t forget to prepare properly.  That means being ready with your persuasion strategies. One of these is the Calculator Close. This is how it works.

Rule 1:   You must give control of the calculator to the other party.

Rule 2:   Any figure punched into the calculator must come from them, never from you.

Start with the asking price – get them to enter this in the calculator. Then break down all the costs involved in getting it to the ceiling price, one by one, including:

  • The cost of the needed refurb; you’ll add credibility by breaking down the cost into separate component parts, materials and tradesmen or room by room.
  • Any buying and selling/refinancing costs (including Stamp duty land tax)
  • Maybe borrowing costs
  • Definitely the profit you need to make from the project to make it worthwhile taking on.

Don’t allow them to use ‘bargain basement’...

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Unmortgageable properties – hidden treasures

property investment Feb 28, 2019

Unmortgageable properties represent a gold mine of opportunities!  But before you jump in you need to understand why they are unmortgageable and which ones have profit hidden in them – and the deals to avoid.

Unmortgageable properties are valuable because:

  1. There is significantly less competitive buyer interest
  2. Vendors are already resigned to accepting below asking price offers.

The vast majority of property investors are mortgage-dependent and when a property can’t be mortgaged they walk away.  This leaves the field clear for the few investors that have the knowledge of how to buy this type of property.

Better still, not only do mortgage-dependent investors walk away from unmortgageable properties, they often don’t even spot them; they’re not on their radar.

Why is an unmortgageable property such a good deal?

The owners of an unmortgageable property are usually aware that it’s unmortgageable.  Often this is because they’ve lost...

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Buying an unmortgageable property

property investment Oct 20, 2018

Some people will warn you that buying a property that you can’t get a mortgage on is madness.  If you listen to them you could be missing out on some great opportunities that may be unmortgageable – but are still very profitable!

Traditional lenders have a long list of types of property they won’t touch.  These include:

  • Derelict properties or properties that are in severe disrepair
  • Properties without a kitchen and bathroom
  • Properties that have more than one kitchen
  • Properties with structural defects, damp, mould, wet or dry rot, wall tie problems
  • Properties with Japanese Knotweed
  • Non-standard construction properties – like the Wimpey No-Fines homes built after WWII.
  • Properties where there’s a boundary dispute
  • A house to flats conversion that has been done without proper planning permission (or planning permission has been applied for after the fact)
  • Properties under £50K in value
  • Properties with fewer than 70 years remaining on the...
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Cash buyer – with no cash!

property investment Oct 10, 2018

Cash buyers get better deals.  They can negotiate substantial discounts on the asking price for properties, sometimes even as much as 50% below market value if there’s a really motivated seller.

The need to get a mortgage slows things down and can take months, so the ability to get the deal done in under a month can be very attractive to a seller who wants to get money out and move on.

I’ve explained how bridging works in many of my blogs, but to really see how it operates here’s a fairly typical case study.

The investor:  An experienced investor, but not with bridging finance.  He had about £38K in actual cash available.

The property for sale:  A former care home, originally a terrace of six houses, that had closed due to the owners being unable to afford to meet the Care Quality Commission standards.  It had been on the market for some time – with no interest.

The asking price:  £350,000

The plan:  To apply for...

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