If you are part way through a UK property development and have run out of money, but need to achieve quick house sales, what are your choices? Chances are, there are not too many.
Let's look at an example and a few figures. Let's imagine you have a London property with an outstanding mortgage of £200,000. Similar comparable properties nearby are listed for £245,000.
The problem is, your property is half way through a build or needs a rather large further investment to bring it up to a habitable condition. Renovations are difficult to estimate the real costs as they are notorious for going over budget, but let's put a value of the property build completion/ renovation costs being say £30,000 extra to bring it to a habitable standard.
So this means, when all done and finished, the property will end up costing you £230,000. Now, assuming you can find the extra £30,000 to actually finish the build, what is going to happen when you actually do finish the build? You will probably put the property on the market for £245,000 and hope that someone pays you enough money to clear the £230,000 to get rid of the outstanding mortgage, right?
Well we all know properties are not moving very quickly at the moment so quick house sales are relatively difficult to achieve, even if your property is in top condition. Sales are slow and the property prices are also low compared to their recent past.
So here are a few suggestions that may help you out of such a solution.
1) Look for a builder/buyer who would be able to finish the build at a cheaper cost than if a builder was to charge you for finishing the renovation costs. If you can find a builder who also wants to buy, you simply contract that the builder will continue making the mortgage payments and preventing your property from being repossessed, as he completes the build of your property. Then once, the build is complete, he can live there for a while, continuing to pay the mortgage until he either is able to sell the property, or transfer over to another bank, clearing your name at this point. So why would this be of value to a builder?
The reason is because a builder may be able to personally finish the build himself at a third or half the price a paid builder would charge, so his personal costs would be lower...eg he might only need to pay £15,000 instead of the £30,000 price for the build costs any other builder would charge. So this means his end costs might actually be £315,000 for a £345,000 property, which naturally is considerably more interesting for a builder to do to be able to turn the property around, and make a profit for his efforts. Secondly, offering a builder this option means the builder does not need to get his own finance. In this time of global financial crisis where bank lending has almost become nonexistent, do you think it would be of benefit to say to someone they don't need to get their own finance? The answer is definitely yes!
2) The other option you may like to consider is to do a joint venture with a builder and offer the builder a share of any profit. How you could do this is as follows. If you are looking for a way of stopping repossession and achieving quick house sales this might be of interest to you. You would simply say to the builder, you do the build and cover the build costs. We can get a third party who specialises in selling property to people called "tenant buyers" who will come in and make payments on your mortgage until they are able to transfer over to their own mortgage later on. There a few companies around the UK that specialise in delivering these type of solutions and finding these type of tenant buyers. The benefit for the builder and the seller for doing such a deal if that they will be able to sell at full asking price as the buyers are always happy to pay full price for a property if they don't need their own mortgage today. Again, finance in the current economic times is very difficult to achieve, and as such, tenant buyers who pay the mortgage until they can get their own, are usually happy to pay a little more (or full asking price) for a property if they can't get their own mortgage today.
So as you may be able to see, there are a few ways to clear your mortgage if you are part way through a build and have run out of money with the bank breathing down your next, or even if you don't have the money to do a renovation.
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