Week 64: Development Finance
Right! Where do I start with this one? Lets just say it's nothing I had anticipated. In the absence of finance or a pot of savings whose services are we to deploy? Well...bridging of course! and more specific, development finance, which is the one we've taken. I am going to go through all the bad before I get to the good (believe it or not there are some good) plus I like to finish on a positive note:
You have to comply with their strict criteria
Send an array of paperwork, (sometimes multiple times)
Have to sign so many documentations that you are signing your life away to them
All in all, it works out extremely expensive to the point were you question the profitability of the deal; and lastly
Fees, interest and set-up costs are extortionate.
I have to indicate again that we are very new to this and made some fundamental errors in our research. As the name suggests its development finance provided for a development project. I naively thought they would give you the capital and off you go to do your project. What came next was a big surprise. We were advised you have to pay for a renovation task, then they reimburse you. Which I guess wasn't the end of the world and thought we can give them a receipt then they can pay us the funds, (in an ideal world haha). In actuality they work in a totally different manner. You have to do a series of mini-renovation tasks which should provide some value to the project and then make an application/request for someone to come out. This can take anything between 1-2 weeks depending on the availability of the valuer who also has to write up a report with their findings. This is then presented to the bridging company before any funds are released.
By the way we paid a nice £700 for this service which is repeated each time the valuer visits the house
Luckily we had some surplus cash to sustain this, but let me assure you that the amount no matter how big, very quickly dries up. To add to the pressure they only give you the amount they feel the property value has gone up by and not the actual spend itself. For example we are now out of pocket by 40k but they might feel we have only provided an uplift of say 30k so what about the 10k shortfall?? You get my drift? Nothing can prepare you for what you will encounter on your first major project.
Q) In hindsight will I want to go bridging again? Never!
Q) Do I have a choice in the matter?...Nope!
But, in all honesty as much as I HATE them I still have to rely on them or who else will lend to me so early on at this stage of my property career?
So technically speaking, they gave me my first break hence I will let you decide if they are a friend or foe.