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    • alaf_lidg_77
    • By alaf_lidg_77 10th Jan 18, 10:39 PM
    • 5Posts
    • 0Thanks
    Conversion of Commercial to Residential, Funding
    • #1
    • 10th Jan 18, 10:39 PM
    Conversion of Commercial to Residential, Funding 10th Jan 18 at 10:39 PM
    Hi, looking for advice on the right financial product to carry out a project.

    In short, Iím looking to purchase a town house property, currently configured as offices, but sold with permission to convert it to residential 4 bed property. I want to purchase it, do the conversion and then live there in the longer term so this is not an investment/profit effort.

    Current advertised price is £300k and Iíve £225k in assets that I can put into this. Iíve a background in the work required and access to additional expertise where needed (Grade II listedÖ). It doesnít actually need that much, just kitchen/bathroom going back in to where they were 6-7 decades ago plus stud walls for fire regs etc. but obviously doing with conservation officer okay will stretch timings. Conversion costs I estimate in the £20-30k range, but my plan is to borrow £150k on a 50% LTV and thus have at least £75k available for it. Clearly I donít want to spend extra if I can help it! Iíll have to contract the building work out, not least as commercial work gets a 5% VAT rate but as a private person I cant buy materials myself for that, so factoring in the time, potentially specialist bits for the listed aspect it makes sense to use builders.

    Iím looking at bridging loan which I think is the only way to do this, 6-12 month duration and an Exit to a standard residential mortgage once the conversion is done and the council classify it as such. £150k is bang on suited to my income (armed forces £45-50k but with post-divorce payments).

    So far that kind of makes sense to me.

    But, is that the only option? Iím new to this aspect of finance (had a standard mortgage before), but they are generally monthly interest (c.0.5%+) but I have seen development loans at a 5% per year Ė are these also suitable as they seem substantially cheaper and bridging seems designed for short term loans Ė this is a project that will deliver a fairly defined output, and already has a defined value.

    It seems a pretty safe bet given the loan is half of its current market price, Iíd estimate £350-400 for the completed value.
    Any advice or comments welcomed.
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    • amnblog
    • By amnblog 11th Jan 18, 8:20 AM
    • 10,551 Posts
    • 4,172 Thanks
    • #2
    • 11th Jan 18, 8:20 AM
    • #2
    • 11th Jan 18, 8:20 AM
    You wont get a 'super lending deal' for this type of project.

    You will pay for the risky deal it is for the lender - hence bridging.
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • alaf_lidg_77
    • By alaf_lidg_77 11th Jan 18, 11:58 PM
    • 5 Posts
    • 0 Thanks
    • #3
    • 11th Jan 18, 11:58 PM
    • #3
    • 11th Jan 18, 11:58 PM
    yeah, standard mortgages are out of the picture until the conversion is complete.

    question is, as an alternative to bridging loan (pricey, 10k costs+ over 12 months), is development finance an option for this kind of project?
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