Commercial to Residential Conversion - Financing Options?

Smudger78

Hi,


Currently looking into a project which will involve buying a commercial property which is currently offices and then converting it into apartments (planning permission already in place). I'm just weighing up the financing options and believe we'd need to raise £75k for our deposit, most of which we were looking to do via equity release from our home. Having spoken to our bank though and describing why we needed it which I termed as "starting a small business" buying and refurbishing property, which effectively it will be as once converted we'll be letting the apartments out, they said they wouldn't lend for that reason. Given this I asked what options I had and they said they would lend if it was for a "personal BTL" (rather than starting a "business") so I said I'd change the approach a bit and go down that route. The problem is I need to get a commercial mortgage to fund the property purchase and conversion and I'm not sure whether my bank will "approve of this" and release the funding once they know its a commercial property. They intimated they'd want to see details of the property being purchased and agreed price etc before releasing funds but I need to get deposit funds in place prior to committing to the purchase and commercial lending so can't see how this can work. I'm slightly confused as when we released equity a few years ago for home improvements they never asked for any "proof" of what we were spending the money on (builders quotes etc..) so not sure why they are now?


I've spoken to a commercial broker about the commercial lending and the advice I've been given is it needs to be one commercial loan covering purchase and conversion costs so I can't go down a standard/domestic BTL mortgage route to purchase the property to satisfy my banks requirements and then get a separate loan to cover the conversion costs. Given this I'm not sure what options I'd have if my bank refuses to lend.


Anyway sorry for the long post but hoping someone on here might have experience of a similar situation and be able to provide an insight and advice.

Thrugelmir

Smudger78 wrote: »

I've spoken to a commercial broker about the commercial lending and the advice I've been given is it needs to be one commercial loan covering purchase and conversion costs so I can't go down a standard/domestic BTL mortgage route to purchase the property to satisfy my banks requirements and then get a separate loan to cover the conversion costs. Given this I'm not sure what options I'd have if my bank refuses to lend.

Your bank isn't going to do anything differently. This is a business venture. So may well need to provide a detailed business plan and costings to support the lending case. If the plan goes wrong and the conversion is unfinished. Then the bank has potentially poor security for the borrowing.

Smudger78

Thrugelmir wrote: »

Your bank isn't going to do anything differently. This is a business venture. So may well need to provide a detailed business plan and costings to support the lending case. If the plan goes wrong and the conversion is unfinished. Then the bank has potentially poor security for the borrowing.

Ok, well if that's the case looks like I'm going to have to look at alternative ways of raising the funds then. Ironic thing is I think they would quite happily lend me a significant amount via an unsecured personal loan as they are forever sending me info in these... May need to look at this and other options together if what you say turns out to be correct...