Development Finance Exit Strategy for £3.2 Million Block of Flats

• Clients: Brother and sister, with the brother acting as guarantor and experienced property developer
• Property: Six-flat London development valued at approximately £3.2 million
• Challenge: Required an exit from development finance despite irregular developer income, limited cash flow and European residency
• Finance: £2.1 million buy-to-let mortgage at 65% LTV

Having a clear exit strategy in place is an important part of any property development project, particularly because development finance is generally intended as short-term funding. I recently assisted a brother and sister who had successfully completed a six-flat development in London and needed to refinance the completed property onto a buy-to-let facility.

The development had a combined value of approximately £3.2 million. The sister owned the property and was named on the existing mortgage, while her brother, an experienced property developer, had provided a personal guarantee.

Following completion of the development, the clients wanted to refinance the existing development finance and raise £2.1 million through a buy-to-let mortgage. Moving onto term finance would provide a more suitable long-term structure for the completed flats and allow them to move away from the short-term development facility.

However, the clients faced a common challenge when refinancing property development finance: the brother’s income did not follow the pattern of a traditional salaried borrower. As an experienced developer, his income could vary considerably depending on when projects completed and properties were sold.

Although he had significant assets, much of his wealth was continually being reinvested into new development projects. This meant his available cash flow did not necessarily reflect his overall financial position. He was also resident and domiciled in Europe, adding another consideration for lenders assessing the application.

I therefore focused on presenting the brother’s wider financial position and extensive track record as a property developer. Rather than looking solely at his current income, I was able to demonstrate his experience, previous success with property projects and the strength of his overall asset position.

I approached a specialist lender that was comfortable considering experienced property developers with more complex income profiles. By providing a detailed picture of the clients’ circumstances and the completed development, I was able to secure a suitable buy-to-let facility.

The resulting mortgage provided £2.1 million of borrowing at 65% loan to value (LTV), giving the clients a clear exit from their development finance and a longer-term financing structure for the completed six-flat development.

The case demonstrates why planning a property development finance exit strategy from the outset can be important. For experienced developers, income can be irregular and may not always fit conventional affordability models, making specialist lender access particularly valuable when refinancing completed developments.

Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal, tax or investment advice. Finance is subject to status, underwriting, affordability, property suitability and lender criteria. Terms, rates, LTVs and availability may vary depending on individual circumstances.

Risk Warning:
Your property may be repossessed if you do not keep up repayments on your mortgage or other borrowing secured against it. Property values can fall as well as rise. Buy-to-let and property development investments involve risks including changes in property values, rental demand, development costs and financing conditions.