With a project loan, you can realize your dream of making money from buying and selling a home.

Read how Maurits made it possible

Maurits is a student at NHH, has a permanent contract with PWC and has an eye for good investment opportunities and making money. Maurits is also a trained carpenter and therefore had the expertise to carry out much of the renovation himself. It was via Kaland og Partners AS in Bergen that Maurits came into contact with Senior Advisor Elisabeth Eland and Eiendomsfinans AS in Bergen.

At the time he got in touch, Maurits needed financing for the purchase of a renovation project that he thought there was an opportunity to make money on. It was at this point that Elisabeth introduced him to the project loan product. A project loan refers to the purchase of a home in need of renovation for resale.

Project loans are a loan product that is particularly suitable for private individuals who want to buy a refurbished property for further sale at a profit (AS can be considered). We currently find that several banks turn down customers with such requests.

What does it take?

It is important that the customer is able to document that the project will be profitable, with a comprehensive project plan that highlights the current value, the expected cost of the project and the value of the project on completion. There’s no hiding the fact that a project like this is resource-intensive and involves many hours of work. “The customer must profit from the project, otherwise it is counterproductive,” says Senior Advisor Elisabeth Eland.

In each project, private customers must have an equity of 20%, which means that Bank2 can loan finance 80% of the purchase price. Customers must finance the renovation themselves. If capital is not available in the form of savings, it is possible to take out a mortgage/pledge on another property to replace the lack of free equity. It is also important that the customer takes into account tax on gains on the sale of the housing project, as well as brokerage costs for the sale.

You must live in the home for one of the last two years if you want to avoid tax on gains from the sale of a home.

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It’s important to have a good project plan

What we see is that customers often start with one or two projects. They then sell the project to make a profit and use this as equity in one or more new projects. Customers can have two such projects running at the same time, as long as the bank finds it financially viable.

When asked if Maurits has a taste for more and envisions more projects like this in the future, he clearly says YES!

Senior adviser Elisabeth Eland is very conscious in advance of making customers aware that no project is without risk. There may be external factors such as falling house prices, additional project costs in the form of unforeseen expenses, interest rate increases and the fact that it may take longer than expected to sell. It’s therefore important to have a good project plan that takes these potential pitfalls into account.

Senior advisor Elisabeth Eland believes that banks will experience an increased interest in project loans in the coming years, especially in major cities such as Oslo, Bergen, Stavanger and Trondheim.

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Loan example project loan: Loan 2 million .eff. interest rate 7.25%, over 25 years. Cost: 2 247 034,-. Total of 4,247,034.

Maurits has consented to the use of information and images in the article.