Commercial Back To Residential

hulme03

Hi.
I have a cafe and shop which was converted from 2 terraced houses some time ago.
I am now looking to convert the commercial premises back into 2 terraced houses.
I own the property outright but don't have the money to finance the work needed for the conversion.
A similar property on the same road has recently been sold for £225,000.
I have had a rough estimate from a design and build firm of £80k to £100k for the work to be done.
I have discussed the situation with the bank I have had a business account with for over 34 years.
They said they were unable to give me a loan as the business would be closed from the day that the work begins and therefore there would be no income from the business.
However, they said their underwriters might consider a loan if it was to remain within a business model.
i.e. an account was set up for the receipt of the sale income which would then be used to purchase further premises to sell, classing it as a business portfolio.
They said, without this, the commercial benefit for the lend would be low and wouldn't be considered by their underwriters.
This idea doesn't fit in with what I want to do though.
I just want to borrow the money, get the work done, sell the houses, pay back the money borrowed and any fees and taxes and then semi retire with the profit made.
So, I would like some advice on how I would go about borrowing the money to do this.
Any advice would be greatly appreciated.
Thanks.
Lee.

user1977

Probably better moving this to the Mortgages board. I expect you'd need development financing.

hulme03

Okay, thanks.
What's the easiest way to move it?

user1977

hulme03 said:

Okay, thanks.
What's the easiest way to move it?

Click on the Report button and choose the option for moving.

RAS

Talk to the Ecology Building Society? But do check you are likely to get planning permission first.

anselld

Do you really want the hassle of managing a build for which you presumably have little or no experience.  Why not just apply for planning permissions and sell as-is with the planning in place.  Do you run the cafe and shop or are there leaseholders in place?

hulme03

Hi.
I have a cafe and shop which was converted from 2 terraced houses some time ago.
I am now looking to convert the commercial premises back into 2 terraced houses.
I own the property outright but don't have the money to finance the work needed for the conversion.
A similar property on the same road has recently been sold for £225,000.
I have had a rough estimate from a design and build firm of £80k to £100k for the work to be done.
I have discussed the situation with the bank I have had a business account with for over 34 years.
They said they would be unable to give me a loan as the business would be closed from the day that work begins and therefore there would be no income from the business.
However, they said their underwriters might consider a loan if it was to remain within a business model.
i.e. an account was set up for the receipt of the sale income which would then be used to purchase further premises to sell, classing it as a business portfolio.
They said, without this, the commercial benefit for the lend would be low and wouldn't be considered by their underwriters.
This idea doesn't fit in with what I want to do though.
I just want to borrow the money, get the work done, sell the houses, pay back the money borrowed and any fees and taxes and the semi retire with the profit made.
So, I would like some advice on how I would go about borrowing the money to do this.
Any advice would be greatly appreciated.
Thanks.
Lee.

MWT

hulme03 said:

I own the property outright but don't have the money to finance the work needed for the conversion.

Do you personally own the property, or does your business own the property, and if so, is that a limited company?

hulme03

Hi.

user1977: Have moved to mortgages, thanks for the reply.

RAS: Yes, I'm sure I'd need to get planning permission and a report from a construction engineer too.
Will definitely look into the Ecology Building Society. Thanks for the reply.

anselld: I run the shop/cafe so there would be no problem with leases etc.
I have no experience of managing a build and presume there would be a lot of hassle but I'm not afraid of a challenge.
Applying for the planning permission and selling as-is is appealing though. There would be no need for the borrowing and I would have an income coming in right up until the sale. i.e. no waiting for the work to be finished and then sale of the houses, possibly 12 months with no income unless I got a job.
The downside to this would be less profit at the end of the day.
Rough maths...If the 2 houses sold for £220k each then £440k
                        Pay back money borrowed, fees, taxes, expenses, £140k
                        Net...£300k
My business and property is on the market for a combined £240,000 and a developer recently offered £210,000 for the property to convert it into care home apartments. I was considering this but they pulled out as they had found another site to work on. They said they would return in the future if the premises were still for sale. Therefore, I presume I would get around £210,000 if I sold it as-is. After fees, taxes etc. I think I'd net around £180k.
So £120k difference if I managed the build myself.
All the working outs are very rough and I could be way off mark with some of the costs and expenses etc.
It would be great if anyone with experience of managing projects like this could let me know if I'm anyway near right with figures.
Thanks for the reply anselld, with the information above would you still recommend selling as-is?

ACG

Not ideal, but you could look at a bridging loan (typically 1% per month). 
They just secure their money against the asset. 

It would give you the money to do the works, also get it changed with the council from a commercial to 2 x resi properties. Once done, you can then sell and pay off the loan. 

hulme03

Thanks for the replies.
MWT: The business is a partnership with my mum and we're not a limited company. We got a 20 year commercial mortgage to buy it over 30 years ago which was paid off over 10 years ago. So, although my bank still has the deeds I presume we own the property
ACG: Bridging loan seems a probable option. I had considered this but was wondering if it would be the best option. Why do you think it's not ideal? Is it the 1% monthly payments?
Also, would I have to put a percentage in myself or can you get 100% bridging loans.