Bridging loan for pub purchase/investment

[quyen]

I am trying to buy a run down, non trading pub for approx £550k but am having trouble raising the commercial mortgage.

To be honest, I don't have any interest in running the pub but am in it for the huge 3 floors residential accommodation above. I think I can realistically get £50k per annum in rent for the accommodation above either as a HMO or 3 separate flats. I would probably convert the pub into an A1 shop (should help the value of the flats above and would not need planning permission as far as I know) and let it out as well.


I have £350k to put into the investment and have a builder for the job but the bank can't seem to see past the run down state of the property and hence won't hand out the requested £250k commercial loan for the purchase.


To overcome, this I am thinking of getting a bridging loan for the £250k and then paying it back in approx 6-12m by mortgaging the above accommodations on a BTL once it is renovated and let.



I don't know anything about bridging loan and would be grateful if anyone can advise on:

1. the fees involved
2. the typical interest rate
3. any early repayment charge
4. whether they would lend on the above proposal?

Thanks


p.s. I know I will need more fund for the renovation but the builder is willing to take a stake in the investment for his work.

[FlashmanChop]

Few points from my intial view;

1. The fees will, in my experience be quite large, much larger then a normal arrangement fee, but, imho the service is far better, depending on whom you use.
2. Interest rates, I have found 9in the past) to be a couple of points above the norm, and often use LIBOR rates. Scotal may be along to advise more…but ive been able to roll up the interest up until paying the loan off, but this was less then 6 months.
3. depends on lender
4. More then likely, but it will depend on your prior experience, credit, and, imho if they personally, like and can see the potential in what you are planning. Can you give them accurate costs for construction, architects drawings, have you overcome planning issues (i.e, you have actually got any issues discharged from the local authority?) with proof

Without them seeing your capable of pulling this off, they wont lend.

I am a little worried about the split between you and the builder? You buy the place, and he does up equivalent to his share ? does he have a vested interest on the mortgage, does he know you well enough vice versa ?

I don’t know you personally, but can you afford to cover his costs, and the interest roll up out of your own pocket, assuming you have put a rather nice lump of cash into the development, and in theory is all tied up?

How do the builders finances stack up ? when will he fit this work in, will he be working around other commitments, or will you both be full time on it?

[Wings]

You might want to go and talk to a solicitor/tax adviser, then perhaps for considerable tax advantage reasons, come back and reinvent yourself/company wise.

[FlashmanChop]

Wings said:

You might want to go and talk to a solicitor/tax adviser, then perhaps for considerable tax advantage reasons, come back and reinvent yourself/company wise.

when? before/during/after ?

[frosted]

Get the bridging loan and then re mortgage when the property is ready. Try not to use your builder as partner, these things never end right