Posted by On the podcast, I’m lucky enough to speak to some fantastic guests. My conversations with them bring so much value to the listener.
Recently, David Jelly joined me to talk about his company PropertyBridges, and how they’ve been successfully helping SME developers fund their development projects, and I thought it might be helpful to share some of his insights here too, on how one might use PropertyBridges as a financing vehicle in order to help pull your projects together in the Irish property market.
Who are PropertyBridges?
PropertyBridges is a peer-to-peer lender in the Irish market, funding small to medium size development projects. They provide bridging and development finance to property investors and property developers.
They have 7,000 lenders on an online platform that’s fully regulated with the Central Bank of Ireland.
Most of those lenders are Irish based lenders that can invest anywhere from 500 – 100,000 Euro per tranche. Their mission is to connect domestic funding sources in Ireland to local projects and SME homebuilders, quality homebuilders with a good track record, because essentially there’s still a funding gap in the market, because the banks are still uncomfortable lending to SME property developers and homebuilders.
They fund anywhere from 500k to 3 million, and anything above that (up to 10 million) can be funded with their partners.
What kind of investors are they dealing with?
A typical deal would be developments between five and 15 units of new build homes. The developer would either purchase the site outright, or approach PropertyBridges for site finance, and then seek development finance to completion. That said, they also provided refurb finance.
Do they work the same as a bank or is their arrangement different?
The deals provided by PropertyBridges are very similar to what a bank would provide, although the LTVs (Loan to Value) and LTCs (Loan to Cost) might be different. Banks tend not to be interested in these smaller kind of deals (sub 3 million).
If you don’t have an incredibly strong track record, or if you don’t have a large amount of equity, you might find yourself in a position where the banks just don’t have an appetite for it, and this is where PropertyBridges comes in.
How long does it take to get funding?
Typically, from term sheet to drawdown, you’re looking at between four to six weeks. Bear in mind though that the length of that process is going to come down to the flow of information between both sides and the speed of the solicitors on both sides. Remember that the due diligence process has to be robust!
If I’m developing a site, do I need to have planning in place?
A lot of lenders won’t lend if there’s no planning in place. You might find, if you don’t have your planning sorted, that you’re only able to raise funding based on the current value of the property, not taking into consideration any uplift value because the planning process could draw things out too long, creating too big of a risk.
Do I need an equity partner?
An equity partner is definitely a good idea, as opposed to debt, because if you’re taking a high level of debt at that point in the process, that debt counter is always clicking. If the planning is delayed for whatever reason, the debt will continue to accrue. Whereas if you have an equity partner, who’ll get like part of the uplift, if the planning is delayed for whatever reason, it most likely that they can live with that a little bit better.
I don’t have much property experience; will I still be able to get a loan?
You really do need to know what you’re doing if you’re getting into the development side of things.
There’s no doubt that if you have a good track record, or are in the trades and starting off on your own to do a refurb (or getting into new builds), it’ll be on your side. As a novice, you need a lot of knowledge across the board – problems can crop up all over the place so you need to know how to deal with them properly.
Say for example that you’re getting into an old building, sometimes you don’t know what you’re going to find, quite often it can be riskier. Imagine you take down a piece of plasterboard and find a huge structural crack running up through the building: you can’t just put the plasterboard back and ignore it!
Can I get a full loan and not put any money in myself?
There always has to be borrower skin in the game. That’s the rule number one of lending, essentially. A borrow and a lender have to be aligned, and making appropriate returns from the project.
Am I guaranteed to get a loan?
David told me that at PropertyBridges, they don’t always complete because something might come up in the due diligence process that that’s different from what’s been presented to them. However, if they’ve issued a term sheet, there’s a very good chance that they’re going to complete on the loan. So, it’s vital that your preparation work is robust – your planning, your numbers, and all your other assumptions.
I’m thinking about becoming and investor, is that a good idea?
The Irish market has grown a lot in recent years, and has been resilient in the face of challenges like Covid, rising inflation and the war in Ukraine. David thinks it’s a win-win for Irish people to be funding Irish homes: on the whole, ‘local’ investment will be put back into the local economy, whereas there’s always a chance that foreign investment will be repatriated back to the original country.
This is just part of a much broader conversation! To hear all of David’s insights, head to episode 191 of the Behind the Facade podcast – also take a listen to my first conversation with him back in 2020, way back in episode 17!
If you’re interested in a property investment mentorship with me check out my coaching programs over on the Elite Property Accelerator.