Case Study – 3 Bungalow Development
Periodically we come across cases that we believe other property investors would be interested to learn about. The summary below is one such case. We hope you enjoy reading it.
A 3-bedroom semi-detached house plus a large side plot which had planning for 3 new build bungalows on it which had already been part completed up to DPC (damp proof course). The existing dwelling was the client’s current residence which had an existing mortgage outstanding.
A local father and son building team who had carried many large extensions in recent years, and historically a few new build properties.
To obtain development finance to provide funds in order to complete the new build properties at a total build cost of £680,000 (£140 sq. ft), where £150,000 had already been carried out by the client. The day 1 residual value of the land was £300,000 with a GDV (gross development value ) of £1.1m. They also wanted to pay off their existing mortgage to aid cashflow. The original quote they had been provided was for a regulated loan product with an interest rate of 1.25% per month therefore, if we could improve on that it would provide more profit in the deal.
After reviewing the property plans, we highlighted the fact that the land occupied by the client’s residence was less than 40% of the overall plot therefore the project could be classed as unregulated. This meant we could access more lenders at lower pricing. We secured the client funding at 0.75% per month which consisted of a £153,659-day one loan to repay the existing mortgage and then a £530,000 drawdown facility to fund the remaining build cost. Based off the total gross loan including build costs and interest, the client is set to make a profit on cost of 34%.
“Thanks for your help and a big thank you for being 1st class all the way through”
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