What Is Small Property Development and What Are the Finance Options?

What is a small property development?

Buying a small plot of land and building 2-4 houses on the plot is known as small property development and this is becoming increasingly common with a current UK housing shortage and a solid demand for homes.

What does a broker need to know about your circumstances?

There are a range of situations that will affect the finance available to you. The kind of questions you will get asked by a broker will be to better understand your individual circumstances. They will want to know if you have:

-planning permission

-build plans

-estate agent valuation

-land purchase

-development cost

-exit strategy

This is a lot of information to ask for but the more information you can supply the better your financial broker will be able to help you secure the best finance for your project.

What are the sources of finance?

Traditionally, it was the high street banks that provided the funding to individuals and small businesses but nowadays there is something known as ‘three tier finance. What this means for you is that there are more sources of finance available to you making it more likely that you will be able to secure the finance needed to start and complete your project.

The three tiers of finance are ‘Tier 1’ which means the high street banks, ‘Tier 2’ which is newer banks known as challenger banks, and last of all ‘Tier 3’ which is peer-to-peer lending.

Your financial broker will find out in-depth about your individual circumstances using the information you supply them to be able to place you with the right lenders. They will also be able to help with understanding the LTV (loan to value) ratios available.

What paperwork should you obtain?

Before you go to meet your financial broker use your time to gather together all your relevant paperwork so that you can go prepared. There are a number of documents that are useful to bring to any meeting especially the first meeting with a financial broker, this is referred to as ‘fact finding’.

Try to collate data and information on:

– assets and liabilities;

– income and expenditure;

– the last 3 months bank statements;

– your outline planning permission (this can take up to 8 weeks to obtain) and;

– the retail value at the end of the project.

It is also important to have a firm idea of your plans at the end of the project, for example, do you plan to sell the properties and if so, what will they be worth? Or do you plan to rent out and if so, what will be the rental income?


If you have a small property development project that you would like to find out more about securing finance give J & J Commercial Finance a call on 07399 660 002 or send us a message. J & J Commercial Finance provides funding to businesses across the UK with access to over 300 lenders and private banks. For more information on businesses we have helped take a look at some of our past clients.

What Do I Need to Know About Buy-To-Let Mortgages?

Buy-to-let mortgages are a good way to get into the property investment market and can be a good way of generating income if managed correctly.

What should I consider?

Buy-to-let mortgages are available to most people provided you meet some initial criteria e.g. annual income, deposit, age, etc. There are a few things will you want to take into consideration before deciding to go ahead.

You will need to find out how the rental income compares to the finance charges. Most buy-to-let mortgages are available on a 75-80% LTV ratio so you will need to compare this against the rental income you expect to achieve. Most lenders expect the rental income to be 25-30% higher than the mortgage payment. The other thing to consider is to put forward a larger deposit (up to 40%) to get a lower LTV ratio.

Who can I borrow from?

There are different categories of lenders available for buy-to-let mortgages. The most familiar and traditional option is high street banks which are classed as ‘Tier 1’ lenders.  A new category of banks has arisen to fill the gap where traditional high street banks say no, and these challenger banks are known as ‘Tier 2’ lenders. Lastly, there are ‘Tier 3’ lenders who deal with the more unusual property or where circumstances do not meet a conventional lender criteria.

If you have been rejected by high street banks J & J Commercial Finance are able to use their network of over 300 lenders to access finance packages from the Tier 2 and Tier 3 lenders to finance your buy-to-let mortgage.

What will lenders be looking for?

Most reputable lenders do what is called a ‘stress-test’ to find out how the finance package they are offering you will be repaid in the event of problems. For this they will compare the rental income against the finance repayment to check if it is viable if anything unexpected does happen.

For buy-to-let mortgages there can be periods where the house is unoccupied and no rental income is gained. They will also take into consideration there may be major repairs needed at some point during the mortgage period. Finally, fluctuations in the housing market will need to be considered by lenders.

What are the regulations?

Most buy-to-let mortgages are not regulated by the Financial Conduct Authority. However, there are exceptions; if you already have a mortgage on a house and want to convert to a buy-to-let or if you are buying a property to let to a close family member. These are classed as ‘Consumer buy-to-let’ mortgages so they are regulated by the Financial Conduct Authority. Consumer buy-to-let mortgages fall under the same strict affordability rules as residential mortgages.

J & J Commercial Finance have access to over 300 lenders and can offer free impartial advice with no obligation. To find out more or to call us to talk about borrowing finance give us a call on 07399 660 002 or send us a message. To find out more about us and what services we provide financial consultancy for head to our website.

What are the rules behind HMO properties & how do you apply for finance?

What are the current rules?

HMO (Houses of Multiple Occupancy) properties are regulated by The Management of House in Multiple Occupation (England) Regulations 2006 (SI 2006 No. 372) as well as being subject to selective or additional licensing by local authorities in England.

Additional licensing allows local authorities to apply further conditions to investors of HMO properties where they feel the current mandatory regulations are not stringent enough, particularly if an area is having problems with HMO properties. Conversely, selective licensing can apply to all or some landlords in an area such as a ‘fit and proper person’ test.

What is included in the current rules?

For HMO properties there are more rigorous and stringent standards to pass for licensing which impacts the finance available from lenders.

First of all there is floor spacing to adhere to, so no less than 4.64 square metres (for a child  aged under 10 years) and no less than 6.51 square metres for one person (aged over 10 years). If two people are sharing sleeping accommodation (aged over 10 years) then floor space should be a minimum of 10.22 square metres.

The other consideration is safety measures to be undertaken including fire escapes free from obstruction and in good condition. As well as the supply and maintenance of key utilities at the HMO property including water supply and drainage as well as gas and electricity and arranging an Annual Gas Safety check and certificate. To see the full list of regulations click on the link: bit.ly/2ubG8PU.

Where can you obtain finance and lending?

Finance can be used for different reasons including refurbishment finance to re-convert and change layout of a HMO property. After completion of refurbishment of the HMO property as part of the ‘exit strategy’ finance can be released through gained equity to invest in other another property.

There are three tiers of finance available to buyers of HMO properties. It is important to understand the criteria for each one to be able to pick the best type for your situation.

Tier 1 funding is provided by high street banks who usually give a lower rate of interest but have more criteria to be accepted.

Tier 2 funding is provided by what is known as ‘challenger banks’ who are challenging high street banks by providing funding when they usually say no.

Tier 3 funders deal with the more unusual property or where circumstances do not meet a conventional lender criteria.

If you have approached a high street bank for funding and they have said no give JJ Commercial Finance a call on 07399 660 002 or send us a message. To find out more about us and who we have worked with take a look at some of our past clients or to see our FAQs head to our website.

Buy-to-let vs house of multiple occupancy (HMO) Finance

Either getting started or growing your portfolio of homes within the property sector can be confusing, and at times mistakes are easily made. Below is a quick outline of what to think about when decided between a buy-to-let property or a house of multiple occupancy, (often referred to as an HMO) when adding to your property portfolio.


Buy to let property usually consists of either one person, a couple or a family. When looking at buy to let properties they are usually two-bedrooms or more and most of them have a garden, if not a rear yard. Or a one, two-bedroom flat built as part of an urban property development. Generally, these require less maintenance, less involvement, and a simpler investment then HMO’s. However, the return and yield tends to be lower when compared to HMOs.

House of multiple occupancy (HMO)

HMOs properties are comprised of multiple tenants who typically have their own room with shared living spaces such as a kitchen and a living room. Gardens and outdoor space are less important for HMO properties. HMO’s are quite often associated with students or single working professionals.

The return on HMOs is usually quite good and above that of buy-to-let properties. However, the standards for HMO properties are more rigorous under The Management of House in Multiple Occupation (England) Regulations 2006 (SI 2006 No. 372) including safety measures, having gas and electricity supply regularly inspected and maintaining water supply and drainage to mention a few. To see the full list click on the link above.

Rules and regulations for HMOs

For HMOs floor spacing is a big consideration to ensure you get the license you need. If the floor spacing is not adequate it will not be classed as a room which can lead to issues with planning and finance options. The minimum room sizes came into effect in 2018 and full details can be found at the following link: bit.ly/2FfSk8J.

Buy-to-let or HMO finance?

To understand what type of finance you need for the property you want to purchase, always begin by speaking to a specialist property financial advisor or broker. They can have a detailed fact-finding discussion with you, to discover more about what you are looking to do and explain all of the options available to you.

To help the financial advisor or broker it is usually a good idea to take your plans to any meetings and share details on the scheme that you are looking to carry out. All of this information is useful to ensure you get the right finance criteria.

How much can you apply for?

For buy-to-let properties there are still some lenders that will give a 75/80% LTV ratio but these largely attract a higher interest rate. Most lenders offer a 50/60% LTV ratio which has a better interest rate and a better rental income rate. For HMOs lenders may ask for a valuation based on commercial valuation but these are usually difficult to obtain. Instead you a lender is likely to offer 70/75% LTV ratio on HMO properties.

J&J Commercial Finance is based in Rotherham but serves businesses across the UK with access to over 300 lenders and private banks. For more great advice head to our FAQs, or to find out who we have worked with previously see our case studies. If you want to know how we can help you send us a message or call us on 07399 660 002.