87% of purchase price and 100% of development costs – HMO Case Study

87% of purchase price and 100% of development costs – HMO Case Study

11:37 AM, 21st January 2022, About 4 months ago

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Luke Casey, one of Property118’s recommended finance broker team has recently structured a bespoke development loan to provide 87% of the purchase price on day one along with the entire build costs on a portfolio of 10 properties being converted into HMOs.

The £6.6m loan was required to purchase a portfolio of 10 properties and complete the building works to convert them into high-standard HMOs. The units had already been pre-sold to a large investment fund, which enabled Luke to structure a bespoke loan with a maximum leverage of 87% on day one along with the entire build costs.

The transaction proved to be so successful that the lender has already set aside £60m to help fund the client’s next development, which will be structured on a similar basis with a pre-sale agreed with an investment fund. In addition, a further two lenders have expressed interest in agreeing on terms with the client.

Luke Casey, Associate, said: “It was clear from the outset that this case would require bespoke terms, outside of standard lender policy, so we took the approach of interviewing lenders we thought might be interested to ascertain which would be most suitable for the deal. It certainly worked. Not only were we able to secure a £6.6m loan, with the client putting just 13% into the deal, but we also secured very competitive rates and we were able to progress the staged payments without the need for formal quantity surveyor inspections. On top of this we have agreed future funding for the client and have additional options with alternative lenders for the future.!

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