Matching your building team with your project.
Gone are the days when you could choose whomever you want to carry out the works on your Property project unless you are purchasing cash.
The reason behind this is simple from the lenders' perspective. They want to see that you have matched the amount and type of works with a building company that are able to show competence in those works.
Let me explain more...
Project 1 - You find a small house flip where the cost of works is ￡40,000.
In this example, the lender will understand that you will be focusing on keeping down the costs and therefore you may choose to project manage the site yourself and bring in individual trades. You may even buy all the materials yourself.
It would b=possibly cost too much to have a 'main contractor'
on this type of project.
Project 2 - You find a renovation project of 10 flats in a grade 2 star listed building and the works are estimated at ￡1,4million.
This is a different proposition as the numbers involved and the expertise needed to deliver this type of project is far greater. The lender will almost certainly insist on you choosing a main contractor to manage and implement the works. They will also expect the Main contractor to have proof of having carried out works on a similar-sized project in recent times. They will also expect the contractors turnover to be at least 3 times the contract sum, meaning in this example that they are turning over at least ￡4,2million and can prove it.
This makes complete sense and yet many Developers struggle to understand the logic of the funder.
Project 3 - Any new build project.
The same principles as above apply in that the lender will want to see the relevant experience in the newbuild sector from the contractor as well as the correct turnover.
So the points above clearly illustrate the need to reflect on the type of building company you intend to choose for your project and that it will need to reflect both the type and size of the project, something which lesser experienced Developers can tend to neglect.