CUSTOMER JOURNEY

Tim's Story

It’s been a long journey for Tim, he’s spent 20 years in the trade and worked hard to create wealth for his partner and two young children. Three years ago he decided to stop working for a developer, and develop for himself. He since spent the period refurbing, flipping or holding rental properties. The boom in Serviced Accommodation has been useful, and Tim has done well from converting some of his properties to Holiday Lets.

Tim's story in detail

It’s been a long journey for Tim, he’s spent 20 years in the trade and worked hard to create wealth for his partner and two young children. Three years ago he decided to stop working for a developer, and develop for himself. He since spent the period refurbing, flipping or holding rental properties. The boom in Serviced Accommodation has been useful, and Tim has done well from converting some of his properties to Holiday Lets.

But now he has a problem, his skills have continued to grow but each project has left some amount of cash in a property. Even with innovative refinancing, his allocated pot for development has dwindled. He has enough to refurbish a flat or bungalow, but his skills and experience justify a larger project. And larger opportunities  keep presenting themselves.

I suggest to Tim that it might be time to look at Development Finance, which is a product he has never used. Because Development Finance allows him to borrow 100% of the build costs as well as around 70% of the purchase price, it significantly increased the size of projects he could consider. None of the brokers he had spoken to were able to access Development Finance, or understood it.

At the time, he had a refurb of a two-bedroom flat planned. The project would have needed 60k and taken about three months. It was fairly standard stuff for him. After speaking about development finance he was able to find a larger project that needed £90k but was triple the size. It was a conversion of a grade II listed building from one house into three flats. A previous developer had gained planning permission, started works and run out of money. The project would take an extra £30k to start, but the end profit was triple that of the flat.

Arranging the finance was complex, it took a lot of trust from all parties to get things off the ground. The process is similar, but more involved than getting a mortgage. For example, Tim was used to Valuations being conducted to give an opinion on end value. Development Finance valuations give a view on three things; the value now, the build cost, and the value once built (Gross Development Value). In Tim’s case he was doing a portion of the build himself, and his build cost was therefore lower than it would be for another investor. The valuer used the standard figures available to him which were higher. This caused a few tense conversations with the Lender as the risk profile of the case rose, but we were thankfully able to work through it.

Six months on Tim has turned a greater profit than expected, and is now sat with a large development pot for the next project. The use of additional debt, or leverage, was the right call. It got him out of a rut and arguably into the next level.

All of these processes are difficult to navigate, they take experience and intelligence. However, when they are done right we are happy to see the wealth and associated stability of our clients increase.

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