The New Business Recovery Loan Scheme

[The Property Ltd]

Hi, finance bods. I have a UK LTD formed in May 2020, SIC code 41202 - Construction of domestic buildings. The plan, as an ex builder, so having experience and recent retraining in modern methods of construction, was to use development finance to 100% fund the total build costs, but arrange a JV with an investor to purchase the building plot, then split the profits on sale. I already know people doing this successfully, however, with covid, JV's haven't happened. Do the 'in the know' people on the forum think that I would be able to take, say £200K to both fund the land and the build. I can build a three bed bungalow for under £100K incl soft costs such as surveys, architects, legals, etc.
Interested to hear your thoughts please.

 

[Mark T Jones]

There is no specific exemption fore what you are doing, but it would require a lender who is familiar & comfortable with what you are doing. The lender panel has yet to be announced

In reality it is extremely likely that any lender will want to see a cash contribution.

TBH, in the current climate I'd have thought there would be a lot of JV cash about.

 

[The Property Ltd]

There is no specific exemption fore what you are doing, but it would require a lender who is familiar & comfortable with what you are doing. The lender panel has yet to be announced

In reality it is extremely likely that any lender will want to see a cash contribution.

TBH, in the current climate I'd have thought there would be a lot of JV cash about.

There is no specific exemption fore what you are doing, but it would require a lender who is familiar & comfortable with what you are doing. The lender panel has yet to be announced

In reality it is extremely likely that any lender will want to see a cash contribution.

TBH, in the current climate I'd have thought there would be a lot of JV cash about.

Thanks for the input. Yes, you would think so. If I had an investor with £100K, I could arrange a plot, get development finance, project manage it myself and turn it around in maximum 12 months, so a return of £20K profit to the investor, I would have thought was reasonable? Investor would have second charge on land as Dev Finance would want first charge.

 

[Marcus A. Wright]

Well there have been very few details released yet about the Recovery Loan Scheme. However based on how CBILS has worked, I would think its unlikely to be available for a brand new company/development.

That then leaves you with standard development finance, you can usually finance 50-70% of the land cost (dependant on planning permission in place). Then potentially up to 100% of the cost of works in arrears, which means you need some funds to start the project before your first drawdown.

Also if you are a first time developer, rates will likely be higher as only a limited number of lenders will have the appetite.

 

[The Property Ltd]

Well there have been very few details released yet about the Recovery Loan Scheme. However based on how CBILS has worked, I would think its unlikely to be available for a brand new company/development.

That then leaves you with standard development finance, you can usually finance 50-70% of the land cost (dependant on planning permission in place). Then potentially up to 100% of the cost of works in arrears, which means you need some funds to start the project before your first drawdown.

Also if you are a first time developer, rates will likely be higher as only a limited number of lenders will have the appetite.

Thanks Marcus. I am probably going to JV with someone who has a piece of land with OPP, it will take 2 bungalows and on comparables, the GDV for the two properties should be around £550K. I'm valuing plot at £100K. Appreciate you input.

 

[AllUpHere]

The deal needs to have more money in it. If I gave you 100 grand for a year I'd get about 10 grand profit after tax. I can make 10 grand in a month with no risk at all. If I knew you I might consider it, but as a stranger there would be no chance.

 

[The Property Ltd]

The deal needs to have more money in it. If I gave you 100 grand for a year I'd get about 10 grand profit after tax. I can make 10 grand in a month with no risk at all. If I knew you I might consider it, but as a stranger there would be no chance.

£10K a month / over £100K a year risk free. You are obviously in the higher tax bracket. Well done to you, there's not many people earning that, especially with no risk. Makes me wonder why people are still holding their money?

 

[AllUpHere]

£10K a month / over £100K a year risk free. You are obviously in the higher tax bracket. Well done to you, there's not many people earning that, especially with no risk. Makes me wonder why people are still holding their money?

That wasn't really my point. People with a few quid aren't going to be at all excited about the prospect of gaining 10 grand by lending someone they don't know 100 grand for a year. There needs to be more money in it.