Case Study

Securing £650,000 Property Finance for a Pharmicist

TL:DR - Property development can be a highly profitable business - and is a sideline for many people with other business interests. But it also means high costs, and to achieve the potential a high scale of funding will be required. At Rangewell, we recently helped fund a pharmacist who had some exciting property development plans. 

Property development is popular,  offering  a high level of profits in a short period -  with the right combination of  property, vision, and finance.

The high cost of property in the UK makes investing in property costly, and  most developers will call in external funding, and include the cost of repayment in their project costing calculations.

We were recently approached by a pharmacist who had diversified into property development, and was keen to embark on a new project.

He wished to buy a large property which had a cafe on the ground floor and three flats above. Its total potential value - once refurbished -  was in the region of £1.3 million.

He had some funds available from previous projects, and with an income of £160,000 from his pharmacy business, he believed he would be in position to buy the property and refurbish it with the help of a loan from the bank.

The various types of property development finance

Some smaller developers may be possible with a Buy-to-sell mortgage which will let you sell a property shortly after buying it – something that can be difficult to do with  a standard mortgage. Lenders prefer properties that are “habitable”, i.e. they have a working kitchen and bathroom.

Bridging loans are often used to buy a property, renovate it, and then sell, paying off both the interest and loan. These  are high-interest loans that can be theoretically used for any purpose, but must be secured against property. They are quick to arrange, and therefore particularly suitable for buying dilapidated properties at auction, when the full amount must be paid within 28 days of the sale. 

For larger projects, a dedicated Property development finance product may be required. These are specialised loans for established property development companies that cover heavy refurbishment.. You’ll needa solid track record in property development., and most lenders will consider loans on a case by case basis, and set interest rates accordingly.

Property Development Loans are a type of short-term lending that, at the lower end of the scale, allows a developer to finance renovation or refurbishment of a domestic property. Larger development loans may allow the funding of large-scale development projects, including the build of entire new estates.

Ground-up development may be funded in a number of ways. The key point to remember is that his type of property funding is always arranged on an individual basis. For more extensive projects, more complex finance arrangements will be needed.

Lending for property development can include a roll-up of interest and associated costs into the loan, which would be paid off once the development is sold.

Lenders will often provide up to 60% of the Gross Development Value, or GDV, of a development project and may expect at least 40% equity of the GDV to be funded by the client with the acquisition of the site.

All property finance deals are arranged on an individual basis, and the lender will look closely at plans and the potential of a site as well as the value of the site itself. This can mean that shopping around for the finance you need is essential. Costs can vary widely between lenders - and when large sums are involved, lenders have to be cautious.  Many have a ceiling on the amount they can lend on a single project. Others may be reluctant to offer funding for certain kinds of development.

Without in-depth knowledge of the lending industry, it can be extremely difficult to find the lenders who can provide the most competitive rates for specialised funding such as Development Finance. At Rangewell we have the necessary knowledge which we can put to work for you.. 

Putting property finance to work

The pharmacist found that despite his  his bank was prepared to offer finance to acquire and develop the property he wanted at a rate of 4.5%  - but despite his experience and sound credit rating, they would only offer a maximum of £360,000

I needed at least £650,000 to secure the property and do the work, and although i had cash for a deposit, I needed to borrow as much as possible to get close to that figure. The bank had helped me before, but this time they were not prepared to provide the help I needed this time.”

The problem was that the bank had revised its lending criteria in the light of Covid, and reduced the sums it was prepared to make available for developers. The outlook for the property sector was uncertain - and the value of the property our client wanted to buy and develop could not be accurately assessed according to their business model. 

Our property experts looked at the deal that the client was wanting to save, and saw that his project was, in fact, still  very viable. 

We knew that many property development funders had shut up shop until the post-Covid future became much more clear - but we did know of one that might be interested and still prepared to lend.

We approached them with full details of the project.

The deal we arranged

We were able to negotiate funding at a rate of 5.5% - higher than the pharmacists bank - but for the full £650,000 required.

“The new  funding  Rangewell secured for me meant that the project was viable again. It was exactly what I needed and we started work immediately. It looks as though the market is actually booming - I’m looking forward to a profitable project - and in the current climate, I can’t complain about that. ”

Why we were able to help

At Rangewell, our team includes experts in Property Finance, and our service is personal. |It lets you talk to a property funding expert who understands your challenges sector to find a solution that is planned around your business needs.

We will discuss your plans then call on our network of lenders, which includes virtually every name in the UK market, to get the funds you need quickly.

So when one lender says no, we will work to find another that says ‘yes!’

Just call us and one of our experts will be able to discuss your options and work out the most cost-effective ways to provide the funding you want - whatever the challenge your business plans present. And, in most cases, our services are absolutely free.

To find out more call the Rangewell Property Funding team for an informal discussion on 020 3318 2613 or email contact@rangewell.com.



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