Securing £250,000 Property Development Loan for a Landlord
Buying a property for letting to students can be lucrative, but finding existing residential property for student accommodation is becoming difficult in many locations. The ideal properties were converted decades ago, and in many university towns, suitable property is now at a premium.
As a result, many people are seeing the business potential of converting property built for other purposes into student housing. This can mean a number of challenges - not least securing the funding required.
We recently helped provide solutions for an experienced landlord and builder.
Our client was a landlord in Southampton saw the possibilities of a small office building built on the outskirts of the city in the 1950s. It was in a good location close to one of the town's universities, but it was run down. It would require a great deal of work to be suitable for any use, with repairs vital.
He had building experience and had developed properties before, and believed that he could convert it into 10 small lettable apartments, sharing a utility area - but that the returns would be substantial. He approached the local council to discuss the feasibility of the project, and they recognised that bringing the property back into use and providing student accommodation would be beneficial to the area.
“The council were positive - which was a green light as far as I was concerned. I knew that the local colleges would be keen. There is always a shortage of student accommodation in the area.”
However, the condition of the building was poor. It was not habitable, and he soon saw that this meant that conventional funding with a commercial mortgage would be impossible.
“The building was in need of new windows, and a general clean up - but we would need to partition it up into apartments, and although the finish would be basic, there was a lot of work to do.”
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The landlord was putting in £200,000 of his own money, but he needed an additional £50,000 to secure the purchase, as well as £150,000 for the building and conversion work. He approached Rangewell to arrange suitable finance.
There are various forms of property finance suitable for property that needs work before it can be used. We saw that the solution was a Property Development Loan. These are a type of short-term lending to finance renovation or refurbishment of a property. They can range from funding for light refurbishment to major renovation and conversion projects - or even ground-up development, starting with an empty plot of land.
Both purchase and work can be funded.
Loan terms are flexible from 1 – 12 months, and arrangements with no monthly interest payments may be available.
Both light and heavy refurbishments can be funded with a 'Refurbishment Bridge’ finance option. This is a versatile solution that can fund 6–24 months of building costs and may include the option to convert into a mortgage once work is complete and signed off.
We found the most competitive source of finance, from a specialist property lender. They would offer the sums required at 10% over 12 months. The landlord was able to use development finance to secure the property and begin work, with payments staged as the conversion progressed.
With the project nearing completion, he came back to the Rangewell team to look at a long term funding solution with lower rates.
The property would be classed as an HMO, or House in Multiple Occupation, which would require a special kind of mortgage. Our contacts include specialist lenders who are happy to consider HMOs, and were able to replace the development finance with a commercial mortgage with a lower rate and repayments spread over the next 15 years.
We help people with property development ideas find ways to put those ideas into practice. Loan, asset finance, commercial mortgage, or any other kind of finance - our expert teams find the most appropriate funding solutions while our network of lender contacts and our unique online tool let us find the most cost-effective rates.
Our service is independent, fast and absolutely free.
Simply call us at Rangewell on 020 3637 4150 - or email contact@Rangewell.com.