How we helped our client make £1.75 million in 1 day
I’m sometimes asked by clients and introducers: How do we work? What types of funding do we arrange? What sectors do we work in? What loan sizes can we arrange?
So, in the next few weeks blogs, I’m going to answer your questions – but rather than just give you the parameters and information as a list of bullet points, I thought it would be much better to tell you the stories behind some of the recent deals we’ve done.
That way, you gain an insight into the different types of funding we can arrange, and also understand exactly how we helped our clients.
So, this week I thought I would share about funding we arranged for a client who is a property investor and the story of how we helped him make a £1.75 million profit on a property deal in just 1 day – all because we’d put the right funding in place.
So how did we help our client make £1.75 million in 1 day….well here’s what happened……
Our client had made an offer to buy a vacant commercial building in Central London at a price of £6 million, and his offer had been accepted. The property consisted of a retail unit on the ground floor with offices on the three floors above.
At the time of purchase, the entire building was vacant, and our client’s intention was to rent the property for investment purposes.
Our client was putting in £3 million in cash – so half the purchase price; and was looking to borrow the other £3 million. Because the loan to value was only 50% he hadn’t envisaged any problems with raising the property investment finance. Little did he know……..
In the first instance he approached his own bank who he’d been with for over 20 years They immediately declined the deal because the property was vacant with the result there was no income.
He then approached the property finance division of one of the other high street banks. He sent them an outline of the deal and 6 weeks later he still hadn’t even had the courtesy of a reply! He’d also tried a couple of brokers, who in our client’s words were “big on talk and small on delivery”.
He was now beginning to despair and on the verge of giving up on the deal. It was at this point he was put in touch with a firm of IFA’s based in Central London who immediately passed the deal onto ourselves.
What Were The Problems With The Deal?
There were several problems:
- The fact that the property was vacant and therefore not income producing was a major issue.
- Our client could not prove any other sources of income as he had just sold a previous business.
- Our client had no other assets – virtually all his cash was going into this deal.
- Because other lenders and brokers had prevaricated, delays had occurred with the result that the client was now under extreme pressure to proceed or lose the deal.
How Did We Solve the Problems?
Here’s what we did:
- Before we approached any lenders, we knew we had to understand the deal and the issues our client had been coming up against.
- We did this by sitting down with our client right at the very outset and taking the time to discuss and understand his funding requirements. We do this in a specific format and is something called our DEEP DIVE EVALUATION.
- Now we understood the deal in detail we could make some strategic decisions about the way forward.
- As a result, we were able to re-structure the deal and present it to one of our specialist lenders who we knew was very likely to do the deal.
Within two weeks, funding was arranged, a valuation carried out and a formal offer letter for £3 million was issued.
Solicitors were then instructed, and exchange of contracts quickly took place with a completion date set.
BUT THERE’S MORE…….
- Throughout the negotiating process there had been another overseas buyer in the background who had also been very keen to buy the property – hence our clients desire to get funding arranged quickly so he could secure the purchase
- Of course, with valuations carried out and funding in place our client had been able to exchange contracts – secure in the knowledge that he had the necessary funding in place to complete.
- However, having exchanged contracts our client was keen to find out if the overseas buyer was still interested in acquiring the property and whether a deal could be struck.
- It was at this point that he went back to the selling agent – and after several weeks of negotiation our client agreed to “sell-on” the contract – at a figure of £7.85 million!!
- And so, on the day of completion our client “sold-on” his contract, simultaneously completing on the purchase and sale of the property.
- Having bought it for £6.0 million, he had sold the property the same day for £7.85 million – a net profit after all costs of £1.75 million – not bad for a day’s work!!
Needless to say, we had a celebratory lunch!
The main problem the client had experienced was that the property he was acquiring was vacant and therefore not income producing.
However, one of our areas of expertise is arranging property finance, and so we knew how to overcome the problem, how to structure the deal, and which lender to approach.
This meant our client could exchange contracts and proceed with the purchase secure in the knowledge that he could complete the purchase if necessary.
This also gave him the time and opportunity he needed to see if he could strike a deal with the other buyer. And of course that’s exactly what happened – needless to say – one very happy client!