This is a business I have been involved in for many years, it is essential to understand all aspects of the property business as decisions have to be made quickly. First is valuation I can put a guild price together based on what has sold in the immediate area and the amount of work required to get the property ready for sale, if that is what is intended, then to get a more precise value I instruct a Chartered Surveyor they will value the property and report on the condition of the building this also comes with insurance should they get the value wrong, and if there is a bank involved they will insist on this. Next is the legal side, the Solicitor will carry out the all the checks and give you a complete report on the title, this will let you know what you are buying and all the boundaries. Next I have to work out how much I would be prepared to lend, this is worked on the basis of what we call loan to value(LTV). there is no set rules for this, but generally the better the property and location the higher loan to value would be considered, 75% is the average. This is an expensive way to borrow money so you have to know the borrower has a strategy to repay the loan, this is where a lot of people get it wrong if they don’t have a clear exit strategy there is usually problems down the line. These loans are generally between 3 and 12 months which can soon absorb a lot of the profit for the developer if they have to pay the short term rates instead of moving the loan to a more long term rate. Rates vary so much in this business as no two deals are the same, some have more risk attached so the rate will be higher, and also what the security is whether it is first charge or second charge this has a big impact on the rate.

Richard Butler-Creagh