Where can I get non institutional investment to develop 4 flats?

Question

I am very close to purchasing a building plot with permission. I am going to propose a two storey,building with 4 x 2 bed flats, and the project will be run by an architect.
(I have no development experience) I am informed by the architect that a project like this will be in region of 220-240K. Good quality 2 bed flats in this particular location (600m from town centre) come in around 140-150K. Even after my purchase of Land (120K) this shows a potential of 240K..... I cannot borrow from Bank against a project of this size, because I have no other property... and have no income....I just have cash, and an opportunity staring me in the face...

Answer 1

Try something called an accelerator mortgage from a company called Buildstore - this will allow you to borrow up to 95% of each project stage cost. i.e. 95% towards land purchasing, 95% towards building etc etc.

One real good thing is that they filter the money out as you need or just before you need it so that your payments are relative to the money you are receiving which is relative to what you are buying on site. I am fairly sure (99%) that this is not based on your own personal situation in terms of monthly wages, that it is based on the value of the development on completion.

http://www.buildstore.co.uk/finance/acceleratorhome.html

Its always best to use as little money of your own as possible and use other peoples money!

Another tip might be to try and get the plans (when signed off and all the permissions have been granted), into an estate agent so that they can sell the flats off-plan so when the build does complete someone is ready to move in straight away. You also get their deposit money at an earlier stage too.

I'm kind of in the same boat myself as I have just started up my own ltd property development company and have renovated one house, bought a buy-to-let flat and just about to buy land for building 6 detached houses.

Have you thought about the tax issues when you come to sell your properties? i.e. Capital Gains Tax (currently at 40%!). Might be an idea to set up a ltd company yourself but I would take advice from a good accountant and also speak to your local business gateway people.

Another tip would be to see what grants etc you might get for the developent - if the area is run down there is often a pot of money ear-marked for re-generation. Other grants will be out there too. I'd strongly recommend going to www.j4b.co.uk then clicking on grants. Fill out the info it needs and search for grants (and loans!) that are available to you in your area and for what you want to do.

Anything else I can help with let me know but I hope you have found this helpful.

Answer 2

You need a wealthy equity partner who would agree to put in some cash of his own and co-sign loan papers.

Answer 3

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