Where else to try for a mortgage ?????

bubbuz

Hi all. Myself and my partner are trying to ( AND WILL ) set up an Eco Tourism business. The brick wall that we have hit is that we cannot get a mortgage for the property that we feel is the ideal location for this venture. I am a 37 year old single father of 2 girls and my partner is a 34 year old single mother of 1 girl and at present live apart and both work part time. We have had a dream for some time now to live together and run a Eco tourism farm which will consist of approximately 10 self contained Eco cottages situated in an idyllic part of Ireland. At last after many months of planning and my partner completing an extensively researched business plan ( through which we have already had two investment offers) we have finally found the perfect location ( sorry Im not going to disclose where ) which is the perfect location for our venture. The cost of this property and land ( a cottage, outbuildings and ten acres) is a mere 97.5 k and can we get a mortgage on it..... NO, ....WHY ???????, because we are two single parents both working part time...grrrrrr. We have the deposit and my partners father has even tried to be a guarantee on our mortgage apps but we have still been turned down as the banks say he is too old.
PLEASE can anyone advise us as to alternative ways to get a mortgage other than a bank.
Many thanks in advance

sandin

You are looking for a commercial mortgage for a business venture. The refusal has absolutley nothing whatsoever to do with your personal circumstances and you need to get this out of your head altogether as otehrwise you are going to have the wrong attitude when talking to the banks.

If your were happily married, had no mortgage, property worth 500k and 20k spare in the bank, you would not get a mortgage for the property you are looking for.

Currently for most commercial property deals banks will give 60% of value - may go to 70% and that's if you are a A1 customer.

Also, can you be 100% certain you can get finance for developing the business, can you be 100% certain of getting planning permission?, what are the sanitary arrangements, do you know the insurance costs, does the site have to be re-zoned, will it become liable for rates? Etc etc etc.

Why not look at a different approach to this? - Look for hotels that have extensive grounds in areas that you like and see if they will lease land to you - then you can offer the best of eco tourism with the back-up of hotel facilities and if it doesn't work, you don't have any massive debt on your heads.

Or look to larger landowners who will also look at leasing lands to you. - Buying the land is not always necessary.

TheCostumeShop.ie: Ronan

What about vendor finance from the selling, I wouldnt imagine there is a huge amount of demand for such type of land on the market. Develop and bring your high level business plan to the owner, offer the deposit you have set aside upfront and the rest on monthly repayments adding the interest you might have otherwise paid to them instead.

The only question then is how will you fund the accommodation and marketing.

smeharg

++1 to what Ronan and Sandin have said.

Other banks are probably going to take a similar view.

There are 2 main reasons a bank will turn down a loan application:

1. No demonstration of repayment ability
2. Not taking on enough of the risk yourself.

In relation to repayment you say the banks declined your application as you are in part-time employment. Is it fair to say then that they also concluded that your business plan didn't show sufficient repayment capacity?

I would say you should be putting in a minimum of 40%.

Presumably this business will require a significant development stage, during which no revenue will be generated. This could be a big stumbling block which should be addressed adequately in your business plan.

You should try and get more detailed information from the banks on exactly why the application was declined. You'll probably need to go back to your business plan and address any identified weaknesses.

Other investors/financiers are likely to take a similar view to the banks so you should do this even if you're not going to go back to the banks.

bubbuz

Thanks for your reply's folks, very much appreciated .

bubbuz

TheCostumeShop.ie: Ronan wrote: »

What about vendor finance from the selling, I wouldnt imagine there is a huge amount of demand for such type of land on the market. Develop and bring your high level business plan to the owner, offer the deposit you have set aside upfront and the rest on monthly repayments adding the interest you might have otherwise paid to them instead.

The only question then is how will you fund the accommodation and marketing.

We did try to go down that route but cannot get a direct number to the sellers and as they live in the uk it is even more difficult, we did speak to their acting estate agent who said that they would not lease the property as they want a fast sale, thing is its been on the market now for two years, I know if I was selling id start looking at a lease to buy especially if the place had remained unsold for so long, the estate agent didn't even put our request to them, he just told us a point blank no on the phone

bubbuz

sandin wrote: »

Also, can you be 100% certain you can get finance for developing the business, can you be 100% certain of getting planning permission?, what are the sanitary arrangements, do you know the insurance costs, does the site have to be re-zoned, will it become liable for rates? Etc etc etc.

.

Planning Permission

Had in depth talks with the planners, the land is secondary special amenity, if it was high special amenity a planning application would not even be considered but because its secondary then a planning app will be considered though dealt with more carefully, also I've checked out the county development plans for the area which the cottage and land are in and number 14 on the list of development plans is to encourage eco tourism in an environmentally sustainable manner.

Finance for developing the business

We have had two investment offers already that once we have the farm funds will be released, also in talks with Leader who have shown great interest, we also have a % of our own funds.

Sanitary Arrangements

I have investigated percolation tests in the area and all have passed with no issues, as my trade is a groundworker installing waste water systems is second nature to me ( also we will be installing composting toilets ).

sandin

Looks like you've done plenty of homework, but there are plenty of locations. I really think bolting it on to a hotel or country house (possibly Bantry House in west cork?) or castle (glin castle limerick, kinnity castle, offaly) etc etc will make far more sense.

Scout around for locations - look for places that hire themselves out for weddings, that maybe part-time hotels etc etc. They may be glad of someone being on the property and may have a gate lodge or cottage on the site you could operate / live in.

Sometimes thinking out of the box and looking for a backdoor solution ends up better in the long run.