Lloyds Bank Q&A – Property Investment and Property Development Lending
On the 23rd August Elliot Brown of Lloyds Bank gave a well received presentation on Property Investment and Property Development Lending as part of our Real Estate seminars.
Following the seminar our Partner in Real Estate James Clewlow sat down with Elliot for a Q&A to find out more about Lloyds lending offering and discuss the common questions our clients have around property investment and property developing lending.
My role is as a Real Estate Relationship Director. In short, we provide funding for all types of property finance. We provide lending for property investment & property development, for both commercial & residential properties across East & West Sussex.
There is no minimum amount that can be borrowed so no-one should have a fear of feeling their project is too small. Our property development policy applies to ‘grounds up’ developments, as well as renovations, conversions and refurbishment, so a very broad scope. Across all these areas we can look to provide up to 65% of total project costs. Such costs include the obvious things such as property purchase price & build costs, but also all other costs that are incurred, such as SDLT, legal fees, finder fees, consultant fees and planning costs. Pretty much the only things that can’t be included is the Bank’s own interest costs and sales agents’ fees (which would come out of sale proceeds).
Lloyds use a Rental Income Gearing (“RIG”) calculation to look at how much can be borrowed. Put simply, this involves taking Gross Rent, subtracting costs associated with the rental portfolio/property (maintenance, insurance, service charges, agents’ fees, etc) and then subtracting the tax that would be payable on the rental profit. This gives a Net Rent figure, which we then compare to our loan repayments (either with a fixed rate of interest or stress-tested base rate) – we are simply looking to have sufficient cover for said loan repayments with a 10% ‘wriggle room’ for unexpected expenditure. In my opinion, this is a great example of lending responsibly: providing funding that we know is affordable with a client’s cost base.
We want to be lending to experienced, capable individuals. For property development we normally recommend someone has at least 2 previous projects of similar size/type to that being proposed. We don’t want to be funding someone’s first project (although other companies will), as often there can be a steep learning curve. Instead, we’ll provide really competitive terms to experienced individuals, but that doesn’t mean someone has to have a vast portfolio of investment properties or have a dozen previous projects to their name.
Typically my role sees me looking at larger lending requests that are £1m+ in size. That isn’t to say they have to be this big though. I’ve recently had agreed a £15,000 loan too, so we’re here to cater for everyone’s needs.
Personally, I work across East & West Sussex. However, there are others that do a similar role that cover other areas such as Hampshire, Kent & London. I’m always happy to put people in touch with their local contact, as knowing the local markets is a key strength that we offer.
Development only: For deals below £500,000 and with only 1 or 2 units the sites can be monitored by me, thus reducing the cost to a client. For deals in excess of either of these numbers we will use local Monitoring Surveyors to provide regular updates, normally every 4-8 weeks, depending on the build schedule.
For any investment or development lending we will always look to use local valuers to complete a valuation, confirming Market Value, Market Rate Rent and commentary on market conditions. Working with local firms ensures that they know the geographical area, are aware of local trends and builds us strong relationships across the area we cover.
Get in touch. I’m always happy to talk through a client’s requirements, whether that be now or a point in the future. My direct mobile number is 07702 673989 and email address email@example.com
Throughout 2019 and 2020 we are hosting a number of property related seminars.
Please click below to find out more about our next seminar:
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