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Most finance brokers will tell you that 100% Property modernisation loans is one of the most popular of the specialist finance products. Although there are several special requirements for this type of property finance, it is possible to find lenders who are willing to help.
The proposal must demonstrate a substantial profit. It does not matter if it is a renovation or development scheme, but either way the end value will need to show at least 25% return on investment. For a simple guide simply add together the purchase price and development (or refurbishment) costs then multiply by 1.25 So if a site costs 200,000 and the total build costs are 33,000 the total costs are 233,000. The sales price would then need to be at least 295,000. Obviously this is a very rough guide but it does give a decent idea.
Another very important issue to address is the reason why the property developer needs to raise 100% Property loans. There is no right-or-wrong answer, but a credible reason is vital. Whilst a applicant may have all their available capital tied-up in an on-going project there can be many other perfectly good reasons why cash is short. Problems can arise when an inexperienced property developer tries to raise high levels of finance. Although their lack of experience can be a problem, the main issue is their lack of support.
As time goes by a property developer will build a team of helpers to support them, this will consist of suppliers, trades people and specialists such as architects, quantity surveyors and solicitors. This team becomes an asset and a experienced team can go a long way towards persuading a bank.
100% Property loans can either be provided by one bank or, more often, be provided by a combination of a main lender and a second specialist lender "toping up" the finance. Either way 100% property development loans can be a very specialised form of lending and using a specialist mortgage broker can really help.
