Advice please - funding for development

k3vin11

Here's my position, I have the opportunity to purchase a six bedroom terraced house in my town, the property is not yet on the market, I know the seller and have already made my interest known. I will be able to get the property for 90-100k, it will need completely redirectoring and most probably double glazed, but apart from that it's in sound structual condition. Completed houses in the same street are on the market for 150-160k.

Myself and my partner have a three bedroom two year old house, we have a 115k mortgage, the same style house has recently been put on the market just 2 minutes walk away for 180k.

My wage is 18.5k a year, my partner has recently started her own business which is a registered limited company, this has been running since March. Before this her wages was 28k a year. We can put 10k into the project from savings but then need to find the remaining money. Worst case secenario I think the redevelopment and fees will set us back 20k. If we can buy it for 100k, spend 20k, we are hoping for a 30k profit.

We have not developed before but believe this opportunity is too good to miss. However we are unsure how to fund the project, can anybody offer any advice. We are due to speak to our current mortgage lender today (Nationwide) and take it from there.

thanks in advance....

PoorDave

First off, amazed you get get a 6 bed house anywhere for 160k, let alone 90k!

You seem not to have much money coming in, unless your wife's business is very successful already.

You say completed houses like this one are listed at 150-160k, but what are they actually selling for? Check out sold prices first, could be a little lower.

Have you listed out everything you'd need to do to fully renovate this house, so you can cost it out, to see if the 20k you quote is reasonable?

I'm approaching this from the point of view of there's no need to worry about the money if the project doesn't stack up financially!

Double glazing will probably be £1000's, as will carpetting throughout for a house that size. New kitchen (if needed) would likely start at £1000, inc everything.

My feeling is that this approach may show more attention to detail to lenders, and thus your position may be stronger i.e "we're going to spend £x, here's our costings for that"

Friends/family interested in investing in the project? Tie up with an MSE poster who has £x to invest and doesn't know what to do with it?

Just a few thoughts.

k3vin11

The house is a terrace close to the town centre, parking is for permit holders only on the opposite side of the street, no garden either, just a back yard.

Difficult to know actually prices of sold houses, estate agents have a couple of sale in the same street and they are under offer with asking prices of 160k. Been looking on nethouseprices.com but it's difficult to get any decent figures as there are several different sizes of house in the same street, the same house further up the street sold for £144,000 in March 2006.

Yes it will need carpeting, yes to the new kitchen and yes to the double glazing, those three are making up the a large chunk of the budget. Obviously with this being our first development putting prices together involves a fair bit of guess work. I'm going to get the keys at the weekend and go and take a closer look.

My dad may consider investing with us, he's mortgage free and retired with some cash available, however if possible I'd love us to be able to take the risk/reward ourselves.

Would a lender consider us for a loan/mortgage against the value of the property in it's current state even though we already have a mortgage?

Thanks for your reply by the way.

Tassotti

Take your guestimate, then triple it and add 10% . If it still stacks up, go for it.

There are many ways to finance this. Your current lender is probably not going to be able to help you, but a decent broker will.

k3vin11

Not being funny but that would make the development cost 66k, which seems a little on the servere side, we are not planning anything structural, this should be (famous last words!) a simple redecoration / updating and then back on the market.