Week 96: I’m so scared and not because it’s Halloween

The Verdict: 

The valuation has come back and it is not good, in fact it’s catastrophic! I did plan for a lower valuation given the house needed a tweak or two, but this is ridiculous! The figures are not anything you can work with and it plunges the project into a major loss. I know people say your first project is always the worst one and a lot of people do make a loss but for me that’s not an option. I am too highly geared to ask for more debt. I have exhausted my list of contacts and the pool for borrowing is getting tighter & tighter like a noose around my neck literally. My biggest concern or priority right now is to pay the Bridging loan back and get them off my back. But with the low valuation I’m not sure if I have enough to pay them back in full. This is because I have to leave a 25% equity into the deal then the remainder to clear the bridge but there is a shortfall of around £25k. While I know this may not sound so high to some but remember I still have to find money to finish off the last bits of repair, furnish the house and pay whatever default charges the bridging company will impose, which currently stands at 3% of the total loan. So you can see how quickly it all escalates?

Funding Options

The entire week was spent frantically looking up funding options. It seems no one wants to lend to property investors. The second you use that term or anything of that nature, I’m talking developer, investor, renovator you're stuffed. They just don’t want to know. Now our small pool of lenders is even smaller. We’ve tried the government backed Recovery Loan Scheme RLS, Crowdfunding, Funding Circle and a business loan from Metro Bank whom I bank with. They require some management accounts from my accountant to show end of year balance which is not ideal given that it’s our first year and the company is trading on a loss. I will have to pay the accountant too, which is money that I don’t have. I would rather inject cash into the last of the renovations in order to complete. 

Last option: Family, oh dear God do I have to...

Negotiations 

I feel sick to my stomach on how to tell my lender that the valuation has come back to an all time low and that we may not complete on time and the chances of that happening is extremely high. All I know is that I can’t bury my head in the sand and that I have to come clean with them at some point. I was banking on the lender's valuer coming back with something better but after he left which seemed somewhat promising I still think it’s not going to save the day. But, all I need is a high enough valuation to be able to pay these gangsters off and I am still left with a shortfall. I have spent the entire weekend thinking about how I will raise the money for this and what are my next steps. To make matters worse these lot have put a stop onto the payout of invoice and have advised that they will need the valuers report to make a sound decision. Their rationale is that we’re way too close to the deadline and that giving us further money could place them in a vulnerable position. Yeh right, them and vulnerable?? 

However, I am going to sleep on this just to have one more night of peace as I know as soon as they will find out, all hell will break loose and I won't be able to think with a clear head. The only hope I am clinging on is that they can figure out it’s not worth their while to take us to court (we don’t have a bucket to p*** in) and also that repossessing the house will be a loss. So it is in the best interest of both parties involved to let us just finish the damn thing. Hand on heart this is probably one of the most challenging things I ever had to go through in my entire career. 

I really can’t afford to lose this house but my choices are drying up faster than the Sahara desert itself.