Help with strategy on aquiring funds to purchase property, outside of banks.

Can anyone advise on how to acquire funding to purchase a property, which we would like to develop. I am looking at alternatives to banks, such as private funding etc. I don't have the funding to purchase the property and the banks would say no. I have completed feasibility on the property and it looks worthwhile to develop, but need funding to purchase. I am obviously trying to do my first development and once I receive purchase funding, I could raise the build money via investors.Does anyone have any recommendations on how to raise the purchase funding? Thanks

 

Ah maybe get a job and save a deposit?
Or investors that want to lend to a newbie where their funds are totally at risk.
Friends and family?

 

If banks won't lend to you, maybe you should stop to consider whether borrowing is a good idea at this time. Even if yiu get the funds you think you need, the development will be at risk when unexpected costs arise - and they usually will.
Marg

 

Hi @Watsy

I'm sorry to be blunt, but this is your first property, your first development. You've got no experience. Furthermore you don't appear to have any additional security to give investors reassurance.

Development is risky under the best of circumstances. What can you actually offer to an investor to make this worthwhile?

 

Thanks for your replies.
Possibly wasn't looking for replies such as "maybe get a job" etc.
I possibly should have included further details. I currently own 5 commercial properties, but not enough equity available yet, all acquired in the last 2 years. I haven't approached the banks, just knowing what their answers will be at this stage. I have engaged a property strategist who will get me private finance from "families" for the development build, using their already built relationships. Just looking at alternative ways of funding a purchase as mentioned. I'm not sure this is the right forum for my question, but thought I'd give it a go.

 

Hi Watsy

I've used private lenders in the past for development. Definitely not my first option, but for quick funding on a development that can be completed relatively quickly they do come in useful.

Their fees and interest charges are high. Biggest problem you'll run into is a development delay, which will equate to a major cost blowout as their interest rates are very high. Also most of these loans are short term, so if your project runs over time, you'll be looking at more fees and a new loan.

Having done developments since the mid 2000's, I can say with certainty that there will be development delays. Even a minor hiccup can push a 12 month project to 18 months or more.

While I wouldn't suggest private funding for a first development, which will be a great learning curve btw, you know your financial situation better than anyone, and if you have the financial backing and a great buffer, you could give it a go. Just ensure your margins are enough to cover any cost blowouts.

 

Thanks Connor for your comments.
When you speak of private lenders, are you referring to lending for the initial purchase?
Our money is tied up in our current other commercial investments and we have come across a good opportunity. Are there private lenders out there for helping with the initial purchase? What is the best approach with them? Currently we have engaged a very reputable strategist who has private lenders for the build, but we would need to find lenders for the purchase. Any ideas? Thanks