We were approached by a broker whose clients, a married couple from South East London, were looking to get back to their property development roots.
The couple’s main focus had always been property development but this all changed when the credit crunch hit. With the UK’s economy in trouble, the pair began to struggle to sell property, so turned their attention to the rental market instead. For the past ten years, the couple have concentrated solely on being full-time landlords with property in the North of England.
With the need for housing increasing, the couple decided they would get back into the property development market by starting with a small project - refurbishing a flat. To help fund this first project they sold all of their rental properties and put down a deposit on a run-down first floor flat in Battersea, London. The pair planned to give the flat a complete redesign, which would include an extra bedroom and an open plan living/kitchen space. It is estimated that these works will add around £100k to the overall value of the property and cost roughly £20k to carry out.
The couple needed finance to cover the costs of the work and some of the deposit. For this particular scenario refurbishment finance via a high street bank seemed appropriate as the rates are often lower than those of the specialist lenders and the clients needed to develop a good relationship with a bank for future deals. Consequently, we approached a particularly high street bank to see if it could assist.
Happy with the couple’s professional proposal and strong track record with carrying out similar developments they agreed to support the deal and offer a very reasonably priced rate. Here are the details:
Property value: £377,000
Loan amount: £190,000
Refurbishment costs: £20,000
Gross development value: £465,000
Rate: Bank Rate + 4% (4.25% term tracker)
Term: 12 months
Lender arrangement fee: 1.25% (£2,375)
Lender exit fee: 1.25% (£2,375)
Broker proc fee: 0.5% (£950)
Consultant: Paul Keddy, 01732 471655
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