How to avoid BTL finance

THE QUESTION

If I have unencumbered property, i.e. no mortgages, what creative finance schemes/packages are available for short or longer term for development projects? I really want to avoid BTL finance.

THE ANSWER

If you really want to avoid BTL finance and are fortunate enough to have an unencumbered property, you are in a very powerful position.

You can offer that property as additional security/extra collateral for any development project you want to get into.  That could mean that you need to put no actual hard cash into your project; save for survey and legal costs.

Both bridging and development finance lenders would typically lend you 70% (with slight variations) of the value of your property; as well as lending against the property you want to buy.  This is usually sufficient to borrow 100% of the purchase price plus the refurb/conversion/build costs if you need to.

For properties that fall into refurb/minor conversion category, that would generally be bridging.  For new build and major conversion, it’s generally development finance.

Once the project is completed and refinanced or sold, the loan is repaid and your property returns to its original state; unencumbered – until you find your next project when you do it all again.

Another advantage of this strategy

You can raise this type of finance pretty quickly and that means you get to behave like cash buyers do and get the benefits cash buyers get.  Raising finance in this way allows you to mimic how cash buyers operate; negotiate hard, complete fast – and make a bigger profit.

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