Commercial Back To Residential

theoretica

So, you hope to spend 100k and then sell the two properties for 225k each?  How much less than 350 would you get selling the property as is?  

Have you looked at property development loans/mortgages? 

hulme03

theoretica said:

So, you hope to spend 100k and then sell the two properties for 225k each?  How much less than 350 would you get selling the property as is?  

Have you looked at property development loans/mortgages? 

The property and business is on the market together for £240,000 and a developer recently offered me £210,000, he wasn't interested in the goodwill of the business. I was considering his offer but he found another site to develop in the mean time so pulled out. He did say he would be interested in the future if the property was still for sale. So, that particular developer valued the property as is at £210,000.
I've only been in touch with my bank as they were aware that we had had an offer. When I told the branch manager, in chatting, that the developer had pulled out and I was considering taking on the project he said it was a "no brainer" and that he would get someone to give me a call. He did this, I gave them the details and then I got the email regarding the underwriters etc.
Not as straightforward as the bank manager had made out to be!
This has all only happened over the last month or so. Therefore I've not looked at any other loan options yet.
Thought I'd put it out on here to get the best advice and to save time in the long run.
I suppose I was hoping that someone who had managed a similar project would read my comment and therefore could get me on the right tracks to start with.
Or I would get several similar replies saying I should get a property development loan/mortgage, for example.
I presume my bank don't do property development loans/mortgages as surely they would of suggested it.

Thanks for your reply

anselld

I suspect the £210k might increase somewhat with the granting of a decent planning permission.

Also, it would be easy for an inexperienced Project Manager to blow a chunk of the difference through not having trusted trade and supplier contacts.

Loan interest rates will be steep and as you say you will be fighting against time to limit finance costs, having lost all business income.

So somewhat risky but if you understand all that and still up for the challenge then why not?  Good luck.

PS.. it all starts with planning either way so might as well start by getting some drawings and applying.

hulme03

Thanks again for the reply, have also put the comment on the Mortgages board as user1977 recommended and had a few replies on there.
Given me plenty of food for thought.
Think I need to ask the council for planning permission, get a report from a construction engineer and then get some plans drawn up.
Then I think I'll get a valuation off an estate agent for selling it as a development project. Take it from there.
The advice received so far has really helped me see things a bit clearer.
Thanks all.

gwynlas

Have the upper floors of the houses remained as residential/flats? Would the properties be large enough to convert into four flats with possible extensions into roof? Do you knw any local builders through your business who would be prepred to do the work for a share of the profits?

ACG

Yes, not ideal purely because of the rates. Who wants to pay 12%, but I suppose it is ideal for what you want to achieve. 

They would not do 100% lending, typically around 70%. But you could potentially raise 70% as it stands now and then once you have made some headway into the project if the value has increased you could look to raise more and in essence do it in stages. 

hulme03

Hi gwynlas.
Yes the property above my shop/cafe is a decent sized 2 bedroom flat. Yes, the premises would be large enough to convert into 4 flats probably without extending into the roof. I do know quite a few builders as my cafe is next to an industrial estate. Whether they would be prepared to do the work for a share of the profits I wouldn't know without asking them.
Is this something that builders commonly do?
Do you have experience in this kind of project?
Interesting the thought about 4 flats, do you think there would be more profit to be made in this?

hulme03

Thanks ACG.
I looked into this earlier and got the impression the lender would want me to use my 30% first before using their 70%.
Is that right?
If so, I don't have the 30% now but would do when a personal pension of mine matures in October.

ACG

No, I dont think so. 

Lets say your property is worth £200k (easier maths), 70% would be £140k. 
Your 30% would be the £60k equity you have in the property. 

hulme03

Okay thanks.
Will definitely look into that.
That would make things much easier and quicker for me.
Thanks