Property developing - how to raise the cash to get started

My boyfriend has just left his job for personal reasons - he was an engineer working in the building industry.
We're ideally placed to do property development - I've done a couple already as a kind of hobby and he's got lots of skills like plastering, plumbing, knowing building regs inside out, joinery. Our problem is how to get started. I'm self-employed and my mortgage company won't lend me any extra cash for a deposit on a new place. He is now unemployed. How do people fund the initial development? Is there a way of raising a business loan for this sort of thing? Or do we have to do something really scary like selling our home to release the equity?
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  • JonbvnJonbvn Forumite
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    I hope your OH has not been watching too much daytime TV? (homes under the hammer etc.) Before you receive screams of don't do it, the only way you will get you initial cash is if you borrow against your existing home. This is extremely risky ATM.

    I think no bank would consider unsecured lending to you, since you do not have any "track record" as a business.
    In case you hadn't already worked it out - the entire global financial system is predicated on the assumption that you're an idiot:cool:
  • kingkanokingkano Forumite
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    I personally think your too late to do this kinda stuff. Having said that.....

    Most people follow 1 of 3 routes. Re-mortgaging which you have crossed off. Finding a partner who puts up the cash while you guys do the work, then split the profits (maybe a family member??). And probably the most difficult, preparing a proper business plan and applying for business funding from a bank.

    Most people aren't unemployed though I guses....
  • DoozergirlDoozergirl Forumite
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    I think selling up pand using your own money is far less scary than having two mortgages and a huge burden of debt. You'll be surprised what happens to your profits when you're paying out huge lumps of interest every month.

    You can present a business plan to the bank, but they will only lend you a certain percentage of the building and you will probably have to fund the development yourself and the rate probably won't be good at all to start off with. Once you build up a relationship and prove yourselves to be profitable you'll get a better deal.

    Otherwise, a decent deposit and a decent mortgage broker is the way to go.

    Don't make the assumption that because you've carried out a couple of successful projects that it is you causing that success. Many people have been 'successful' through rising prices, not necessarily the work they did. You should analyse what you have already done objectively. If you do present to the bank, this is your 'track record'.
    Everything that is supposed to be in heaven is already here on earth.
  • Dont be put off by the negativity, I think people get confused between "property investment" and "property development". Turning run down wrecks into nice homes is always a good thing and we need all the decent housing stock we can get!

    Im sure you are well aware of this risks!

    So yeah to raise money you either need a loan from the bank - worth a go, they can only say no! Knock up a business plan and convince the manager! Or as suggested use any equity/savings you already have.

    Starting any business is always risky. But if you guys are committed and your partner has the skills then there is no reason you cant turn a profit. It wont be easy though! Id suggest that at this time the real money will come from doing building work, the plastering, plumbing, electrics, that kind of stuff. You'd prob then want to limit your costs when it comes to fitting the place out. Heck we've all watched property ladder ;)!

    Anyways, good luck - and do your research. Hopefully this will go much further than the MSE forum (as helpful as it is ;)!)!! :)
    Debt: a bloomin big mortgage

    all posts are made for entertainment value only, nothing I say should be taken as making any sense and should really be ignored
  • Alan_M_2Alan_M_2 Forumite
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    Right now you're not at the stage of "Starting your own business" you one step further back.

    Without any external help the way to go is as Doozergirl suggested.

    You can't remortgage, so your only option is to find a place that's run down, sell up - move in, live int he mess whilst you do it up (which if your OH is out of work should be reasonably quick) then get it on the market.

    You're then on your way.

    Property development doesn't happen without capital, the only way you can generate capital is to start from the bottom rung.

    It all depends on how much equity you have in your home right now.

    As a rule of thumb, a business without a track record any bank will lend you 50%-60% of whatever you are investing (of your own money). With a half sensible business plan.

    However finding a run down place that's still habitable isn't easy as you're competing with the big boys that do this for a living and simply walk in a write a cheque.

    Do your homework and look around, don't expect to find something in a matter of weeks though, your OH needs to find a job whilst you are researching and the development is a fall back idea.
  • keeperbearkeeperbear Forumite
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    JennyP wrote: »
    My boyfriend has just left his job for personal reasons - he was an engineer working in the building industry.
    We're ideally placed to do property development - I've done a couple already as a kind of hobby and he's got lots of skills like plastering, plumbing, knowing building regs inside out, joinery. Our problem is how to get started. I'm self-employed and my mortgage company won't lend me any extra cash for a deposit on a new place. He is now unemployed. How do people fund the initial development? Is there a way of raising a business loan for this sort of thing? Or do we have to do something really scary like selling our home to release the equity?

    Before you do any of this compare your potential monthly profit from developing with your boyfriend's potential new salary. How much do you need to earn from developing?

    As other posters have stated, many other people are doing what you want to do, and competition for suitable properties will be high.
  • kingkanokingkano Forumite
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    Dont be put off by the negativity, I think people get confused between "property investment" and "property development". Turning run down wrecks into nice homes is always a good thing and we need all the decent housing stock we can get!


    I'd say the opposite DO be put off by the negativity, or atleast consider both angles! As mentioned, 'we've all seen property ladder'. And THAT is the problem. The competition to be a property developer part time, or even to try and get a bargain house that needs work for your family, has meant that properties that are like this usually go for ridiculous prices. Usually meaning the profit just isnt there unless we carry on the rising market conditions.
  • dannyboyceydannyboycey Forumite
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    JennyP wrote: »
    My boyfriend has just left his job for personal reasons - he was an engineer working in the building industry.
    We're ideally placed to do property development - I've done a couple already as a kind of hobby and he's got lots of skills like plastering, plumbing, knowing building regs inside out, joinery. Our problem is how to get started. I'm self-employed and my mortgage company won't lend me any extra cash for a deposit on a new place. He is now unemployed. How do people fund the initial development? Is there a way of raising a business loan for this sort of thing? Or do we have to do something really scary like selling our home to release the equity?

    You've missed the boat.

    Selling your home to provide capital for property investment in the current climate would be nothing short of mental.

    Daytime property !!!!!! shows have a lot to answer for.
  • DoozergirlDoozergirl Forumite
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    Selling your home to provide capital for property investment in the current climate would be nothing short of mental.

    Yes of course. Selling your home to buy another one is completely beyond all logic :confused:
    Everything that is supposed to be in heaven is already here on earth.
  • dannyboyceydannyboycey Forumite
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    Doozergirl wrote: »
    Yes of course. Selling your home to buy another one is completely beyond all logic :confused:

    I meant development. Or more precisely, 'Flipping'. Unless done very quickly with a very well chosen property, it is very dangerous.

    And in many respects, YES... ' Selling your home to buy another one is completely beyond all logic' - if you are unemployed and thinking of scaling up or speculating.
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