Categories: Case study | development finance

A client approached us looking to raise capital in order to fund development of an eight-unit holiday let farmhouse. It was a grade-two listed property, and they were looking to fund an extension, among other changes to the property.

The investor already owned the farmhouse, and just needed the funds to complete the works. The investment was set up through a limited company, and had 4 directors. All four directors had extensive building experience, and already had a portfolio of roughly 5 properties.

Contents

The case

Investment route: This investment was made through a limited company

The existing portfolio: The clients owned a number of properties

The property: Grade-II listed farmhouse

The tenancy arrangement: Short-term holiday let

The borrowing requirement

The investor wanted to raise £500k in total, with 160k of the total loan amount needing to be released at the start to begin the project, with further release of funds as each stage of development completes.

There were issues regarding the loan amount, as there weren’t many development finance lenders that would lend to that small a loan amount. However, due to how many lenders we are connected to, we were able to place them with a lender as well as offering a competitive rate.

The challenges we overcame

The development project to turn a farmhouse into an extended 8-bed holiday let was placed with a specialist lender offering development finance. If the loan amount was roughly a million, there would have been more lender options.

The farmhouse, while owned outright by the investors, was a grade-two listed building. Therefore, two things needed to happen. First, the investors needed to get clear planning permission from the local authority, and second, we needed to find a lender that would be happy to lend on a grade-two listed asset. Both of these were achieved.

All four investors had been builders previously, and had a lot of experience. This worked in their favour as lenders were more comfortable placing capital with them.

The solution

Gross Development Value (GDV): £1,300,000

Total capital raised: £500,000

Loan-to-value (LTV): 38 per cent

Interest rate: 0.85 per month (rolled up interest)

Loan type: Interest only

Term: 12 months

Lender arrangement fee: 2%

Monthly income: 8-9k per month

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