Mortgage for land via auction?

[andyb28]

Good Morning,

There is a plot of land near me going up for auction. Its traditionally been a arable field, but its near another housing development.
I am potentially interested in buying the land and in the future building my company an office on part of it.

I have no ideas about auctions, but wondered if the forum could advise of a broker or company that could provide the funding for such a purchase.

[22]

andyb28 said:

Good Morning,

There is a plot of land near me going up for auction. Its traditionally been a arable field, but its near another housing development.
I am potentially interested in buying the land and in the future building my company an office on part of it.

I have no ideas about auctions, but wondered if the forum could advise of a broker or company that could provide the funding for such a purchase.

How are you servicing the finance? Or are you hoping they'll lend based on future value? If you're just a regular bloke and need funding (& without having full details), I'm inclined to think it's a bad idea. Are there no ready-built offices you could buy with a commercial mortgage (often easier if owner occupier)?

The auction value will be that of potential residential development, the sellers may have a reserve as such. There would likely be an uplift clause for any future added value - again based on a residential development. If there is potential for development, you'll be competing with companies with finance on tap (or not required) and if it's a small plot, lots of wannabe home builders out of their depth.

Not my industry in the slightest but have worked with big land owners on projects.

[LooneyTunes]

If you find someone willing to lend, make sure you’re clear on valuations they’ll go to.

If there’s any competition, good land will often sell for well in excess of its initial guide (reaching big money if there’s any prospect of development).

[98elise]

The problem is completion is normally just a few weeks from the sale. Hammer fall is exchange so you need the deposit ready to pay on the day, and the finance in place for completion.

There are bridging loan companies that specifically cater to the auction market.

[andyb28]

Many thanks, some points I hadnt really consider have been posted.

its 14 acres and unfortunately has been marketed as future development potential. So, it may well go for a lot more than the guide price.

[LooneyTunes]

14 acres = 5.4 hectares.

That’s quite a big deal for agricultural land because, when you get past 5 hectares, the permitted development rights are quite generous if for agricultural purposes.

I’d wager that whoever buys it will have a shed on there in no time at all.

[JQ]

andyb28 said:

Many thanks, some points I hadnt really consider have been posted.

its 14 acres and unfortunately has been marketed as future development potential. So, it may well go for a lot more than the guide price.

What's the guide price? And please update with how much it sells for.

[andyb28]

Sadly, I couldnt get finance sorted in time.

Guide price was £200k, it sold for £190k.

[98elise]

andyb28 said:

Many thanks, some points I hadnt really consider have been posted.

its 14 acres and unfortunately has been marketed as future development potential. So, it may well go for a lot more than the guide price.

I'm finding auction guides to be fairly accurate at the moment (as you found with the sold price). Most of what I've been watching has gone for near guide, and a property I did buy was bang on guide. I was prepared to pay 30% more, and it still would have been a bargain.

[JQ]

andyb28 said:

Sadly, I couldnt get finance sorted in time.

Guide price was £200k, it sold for £190k.

So £13,500 per acre. It was likely worth £5,000-£10,000 per acre as arable land and the rest was Hope Value. Most banks won't lend on Hope Value, for obvious reasons, so all the LTV calcs will have based on a value of £70,000 - £140,000, and at 65% you'd have been able to borrow £45,500 to £91,000. You'd get higher LTV's with bridging co.'s but would need an exit strategy and the interest rates would be eye watering.

The best way would likely have been to try to extend your borrowing on other assets.

If you're still keen and you think it's good value you could always offer the buyer £230,000.

[andyb28]

JQ said:

So £13,500 per acre. It was likely worth £5,000-£10,000 per acre as arable land and the rest was Hope Value. Most banks won't lend on Hope Value, for obvious reasons, so all the LTV calcs will have based on a value of £70,000 - £140,000, and at 65% you'd have been able to borrow £45,500 to £91,000. You'd get higher LTV's with bridging co.'s but would need an exit strategy and the interest rates would be eye watering.

The best way would likely have been to try to extend your borrowing on other assets.

If you're still keen and you think it's good value you could always offer the buyer £230,000.

Thanks JQ,

That makes sense. I did have another property I could have leveraged, but just didnt have the time to sort this out.
I think a developer purchased the land, so is unlikely to want to sell.

Much appreciated for your answers and others that contributed. I just wish I had found out about the auction a bit sooner.

[LooneyTunes]

98elise said:

andyb28 said:

Many thanks, some points I hadnt really consider have been posted.

its 14 acres and unfortunately has been marketed as future development potential. So, it may well go for a lot more than the guide price.

I'm finding auction guides to be fairly accurate at the moment (as you found with the sold price). Most of what I've been watching has gone for near guide, and a property I did buy was bang on guide. I was prepared to pay 30% more, and it still would have been a bargain.

Where I am they seem to be accurate for resi, but they're often breezing through them for agricultural. Probably localised, but a couple of housing developments have put cash in the pockets of farmers who then want to buy more land.

[98elise]

LooneyTunes said:

98elise said:

andyb28 said:

Many thanks, some points I hadnt really consider have been posted.

its 14 acres and unfortunately has been marketed as future development potential. So, it may well go for a lot more than the guide price.

I'm finding auction guides to be fairly accurate at the moment (as you found with the sold price). Most of what I've been watching has gone for near guide, and a property I did buy was bang on guide. I was prepared to pay 30% more, and it still would have been a bargain.

Where I am they seem to be accurate for resi, but they're often breezing through them for agricultural. Probably localised, but a couple of housing developments have put cash in the pockets of farmers who then want to buy more land.

I'm only looking at residential and commercial so it could well be different for agricultural.

[Pot Bellied Fool]

andyb28 said:

I have no ideas about auctions, but wondered if the forum could advise of a broker or company that could provide the funding for such a purchase.

Speak to Graham on 01704 808286, he does lots of awkward & non-standard stuff.