Financing a Group Build

financing a group build extension

Financing a group build is just one of the many challenges faced by like-minded individuals who group together to design and construct a collection of individual self build homes.

There are many reasons to get involved in a Group Build, including the potential to access a wider choice of plots and the opportunity to help create your own neighbourhood.

Encouragingly, a Group Build is also highly attractive from a financial point of view. There are economies of scale available when purchasing from contractors and suppliers. Also, minimum order quantities are no longer a barrier once you are a multi-unit project.

Structuring the group
A group can be as large as 30 members, with each having different objectives in terms of types and sizes of home. It is likely that they will each want an influence on the design and the general level of specification. To be able to respond quickly to the emergence of a potentially suitable site, funds need to be in place.

The group members need to form themselves into a legal entity, possibly a limited company, with a published set of rules and procedures. Among other things, these will govern the timetable and scope of design involvement each member can have. Any competent member of the group can be elected to drive the project.

After planning, the building work will be tendered and the contract let to a suitable builder, who will be managed by the group’s architect and wider professional team.

Once the group has formed as a legal entity, identified collective requirements and arranged funding, the search for a suitable site can commence. Although the group will be competing for planning-approved land against professional developers, the group can justify paying more than the market price because there is no requirement to generate a profit margin.

Arranging the funding
Dependent on the size of the plot or the accommodation allocated, each group member will need to contribute towards the following:

  • Land acquisition
  • Design, Planning and Construction costs
  • Community operating costs

The method of dividing up the land will help decide what funding routes are available. If all houses are detached properties, for example, it might be possible to allocate individual legal title to the separate plots. In this case, it would be possible for each member to arrange their own individual self build mortgage.

However, it’s likely that a group build will include shared neighbourhood assets and may also include attached or terraced houses or apartment blocks. Where this occurs, the group entity would have to secure finance for the build and the complex nature of a group self build means that care is required to prepare a robust borrowing profile.