Presentation by Nathan Brown (Co-op Culture) on 'Introducing Financial Planning' for community-led housing, which he gave on behalf of the Brighton & Hove Community Land Trust on 24th February 2018. Watch the video from the presentation and find out more information here: https://bhclt.org.uk/introduction-to-financial-planning-for-community-led-housing-video/

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Action Learning for
Community-led Housing
Introducing Financial Planning
● Nathan Brown
● Co-op Culture
● nathan@cooperantics.coop
● www.culture.coop
● 07884 312573

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Introducing Financial Planning
● Why community-led housing groups need
financial plans
● What is financial planning?
● Different financial planning tools
● The range of types of projects and the types of
financial plans they need to have
● What does it mean if a project is
‘financially viable’?

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Why groups need financial plans
● Viability – will it work
● Credibility – beyond blue sky
● Identify the variables – provoke discussions
● Identify size of the financial gap(s)
● Identify Critical Success Factors
● Inform the group’s priorities and future plans
● Type and sources of support needed
● Member/ community understanding

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What does ‘financially viable’ mean?
● It will make enough surplus/profit
● It can pay the costs of finance
● The offer to residents is competitive
In theory
● We can access enough money at the right
time

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What is financial planning?
● A way to test our ideas
● Committing to paper/software what we will do
● Simple calculations
– Ballpark outline
– Investment requirement
– Profitability
● Projections
– Cashflow
– Profit & Loss (Income & Expenditure)
– Balance Sheet

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Ballpark outline
● X people paying £Y rent will generate £Z income
● Total cost of development is £X, planned equity
investment by leaseholders is £Y
● Total cost of property is £X, mortgage available for
80%, means we have to raise
£X x 20% to access the mortgage
● Mortgage repayment is £X per month,
management costs are £Y, means we have to raise
at least £X+£Y in rent each month

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Investment requirement
● What is needed to get you to the first day of
income flowing in? e.g.
– site purchase or property purchase
– development or refurbishment
– professional fees, surveys, Stamp Duty Land Tax
● What other extra-ordinary expenditure is required
and when?
● Are there stages?
● Sources and the cost of finance

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Different forms of finance
● Grants
● Loanstock
● Mortgage
● Private Loans and Bonds
● Equity – community shares
● Deferred payment
● Reinvested surplus/reserves

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Investment requirement - example
Purchase of nine homes for affordable rental £265,824
Legal costs relating to purchase, rental and resale –
including valuation fees, drawing up of sale and rental
agreements, affordability in perpetuity clauses, Land Registry
fees, and conveyancing
£24,798
Stamp duty £8,471
Marketing of properties for rental and re sale‐ £7,324
Engagement of a Project Manager on a part time basis to‐
oversee completion of the acquisition of 16 homes
£10,165
Service charges payable during the period between
purchasing and re selling intermediate flats‐
£858
Council Tax payable during period between purchasing and
reselling intermediate flats
£1,200
Landlord insurance £1,400
Total £320,040

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Example Simple Calculation
Repairs/
maintenance
£300
Insurance £500
Broadband £30
Electricity + gas £800
Book-keeping/
accountancy
£30
Consumables £90
Bank charges £30
Misc/contingency
5%
£450
Total £2230
30 tenants @£300 pcm £9000
Management costs £2230
Voids – 5% £450
Remaining for lease/
mortgage
£6320
30 yr mortgage @ 6%
80% LTV £1.2 Million
£5756
240k loanstock interest
@ 3% p.a
£600
£6356

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Financial planning - variables
● For each variable:
– What is your target?
– What is the Maximum or Minimum your
Members will accept?
– How much wiggle room is there?

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Financial planning - variables
● Number of people
● Tenure - Number of lets, sales, leases
● Income – rents, service charges, lease payments,
investment
● Expenditure – purchases, developments,
associated costs, leases, finance costs,
maintenance & repairs, voids, management costs,
taxes, insurance
● Time

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Financial planning – cash flow forecast
● A cash flow forecast looks at the balance of all
money flowing into and out of your society at
regular intervals.
● Time period
● Produce a spreadsheet with all cash in and out
per week/month.
● Pay special attention to investment
repayments

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Financial planning – cash flow forecast
● Consider inflation increases (expenditure)
● Consider rent & service charge increases (income)
● Include future developments & improvements,
cyclical maintenance, replacements
● Running total at the bottom (opening & closing
balance)
● Identify pinch points
● Test for scenarios

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Income & Expenditure

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Balance Sheet

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Different financial planning tools
● Bespoke spreadsheet
● Radical Routes Model spreadsheet
● Community Land Trust Appraisal Tool
● Only as good as the data
● Not a replacement for management
decisions

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Radical Routes Model Spreadsheet
● Based on wide experience
● Open source, ongoing improvements
● “Idiot proof”
● Suitable for mortgage and/or loan stock purchase
of property to rent
● Cashflow, Income & Expenditure
● Could be adapted
● http://www.radicalroutes.org.uk/
publications-and-resources.html

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Bespoke spreadsheet
● Designed to fit your particular needs
● Requires expertise – finance and software
● Does it produce the right reports?
● Errors (check all the formulae)

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Community Land Trust Appraisal Tool
● Result of experience, tested
● Suitable for range of tenures
● More complicated
● Cashflow, Income & Expenditure, Balance
Sheet
● http://www.communitylandtrusts.org.uk/

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Types of projects & types of financial plans
Tenure
Social rent
Affordable rent
Market rent
Shared equity
Sale (covenant)
Outright Sale
Finance
Grants
Loans
Mortgage
Loanstock
Community
Shares
Bonds

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Questions