Property development finance

Today sees ‘the cheapest home in Britain’ up for auction with an asking price of £7,000. The mid-terrace property is in the Welsh Village of Maerdy, in the Rhondda Valley. Last week, also saw a former ambassadorial property in Kensington, valued at £75 million, possibly becoming the world’s most expensive ‘fixer upper’ requiring £10m of further renovation.

In this light, we at Bridging & Commercial wanted to ask some of the lenders in the industry what have been the lowest and highest loan enquiries they have received and on the same scale which bridging loans have they actually completed.

Yasin Patel, Director at Mayfiar Bridging, told us the “smallest enquiry we have had is £6000, however our minimum loan amount is £25,000 and is the smallest loan we have done. The good thing about small deals is that there are never complications; most people can easily fit on the affordability on a £25,000 loan.

Richard Deacon,Sales & Marketing Director at Masthaven Bridging Finance, stated: “The smallest enquiry we have received was for £15,000 but our minimum loan size is £50,000, so I don’t think we would be much help with any of the really small stuff.”

Richard King, Business Development Executive at Bridgebank Capital, answered: “The smallest amount we will advance is £30k at 65%, and at the other end of the scale we have completed a number of deals at £2m at 60% LTV. For us though, the size of the deal is not important, and we have a real appetite for lending on heavy refurb scenarios or unmortgageable properties. Our market leading Renov8 product allows subsequent drawdowns in line with the increase in value as works are done.”

Lucy Barrett, Director at Vantage Finance, divulged: ”We get enquiries for loans as low as £10,000, but typically lenders will have a minimum loan requirement of £25,000 to £50,000 to make it worthwhile doing, and the smallest loan which we have completed is £25,000.  Some lenders are in a position that they do not have to put a cap on their maximum loan size and deals are being done for many millions by lenders, where some prefer not to be too exposed on any one deal and restrict to say £1million per deal.”

Colin Sanders, Chief Executive Officer of Omni Capital, told us the smallest and largest enquiries they’ve received “have ranged for loans valued at several tens of thousand pounds up to multi-million pound sums. This is hardly surprising given that our published criteria offer bridging products from £75,000 on a 2^nd charge basis and up to £7.5million on a 1^st charge basis.”

In regards to the largest loan enquiry they’ve received, Richard Deacon told us, “We recently issued some terms on a £23,000,000 bridge for a property in central London which was (obviously) very nice!! Sadly the deal didn’t go anywhere in the end as the make-up of the purchase changed somewhat over the weeks from introduction.”

Christian Faes, Managing Director of Montello, said: “At Montello, our transaction sizes vary, as we are running a pool of money and need to manage an efficient spread across the portfolio to ensure that risk is mitigated. Having said that, the largest loan that we have completed is £4.8m; and the smallest was about £40,000. So the size of our preferred transaction changes, but we are generally able to cover a wide spread of the market.”

Yasin Patel added: “The highest loan amount enquiry we have had is £130m on a very exclusive hotel in central London but as we only do £500,000 maximum at the moment, but we had to unfortunately decline that loan. Usually bridging loans are in the region of £250k and £400k that’s the norm we have found. Investors realise the cost of bridging is high and on the large loans payments are very high per month.”

Colin Sanders stated: “Omni Capital recently completed a second charge bridging loan valued at £5million. It was introduced by specialist distributor Brightstar Financial, and exhibited a high degree of ‘packager-lender’ co-operation during the application process.

“As an intermediary-centric lender, we entertain all genuine enquiries and pride ourselves on our flexibility. Our current lending portfolio comprises a balanced blend of both high and lower value loans – a position with which we’re highly comfortable.”

Richard Deacon told us that in his career “the smallest [loan] I know of completed is £15,000 from Holme Financial, and the largest I’ve heard of was Drawbridge and a £24 million loan.

“As a general rule the larger deals are much more difficult to see through to drawdown simply because the client will do as much as they can to avoid actually using the bridge. 9 times out of 10 they look at a bridge as a last resort to help them out, but at that high level, the cost is so prohibitive, they often look for other opportunities to “get them over the line” in whatever deal it is they are after.”

The £7,000 property in Wales “may be the cheapest home in the UK, but could need somewhere between £25,000 and £50,000 spent on it to make it legally inhabitable” exclaimed property analyst Nigel Lewis at FindaProperty.com to The Daily Mail. The building’s low cost classes it as a “desperation home”, said Mr Lewis, making it an ideal opportunity for an investor to renovate the property and rent it out on the UK’s booming buy-to-let market. “Even if the total cost ends up being £50,000, they may be able to rent it out for £300-400 a month and still make a good return,” he added.

The Kensington property, No.1 Campden Hill, is a rare opportunity but not one for an impatient buyer, believes Peter Mackie, managing director for Property Vision, which specialises in finding homes for the wealthy. He said: “It’s an impressive property and the quality of the garden makes it very special – it’s like a country home in the centre of London. But anyone buying it must have an appetite for work; there is no instant gratification with Campden Hill. The work, based on the planning, will probably take at least 14 months to complete and cost an eight-figure sum,” reported the Metro. When finished it will include a pool, squash court, cinema, wine cellar, gym and even a nightclub. There is also a three-bedroom cottage for the staff located in the 3,000 square metre garden.