How we value security for Investors?
When you invest in a FOLK2FOLK loan, your capital is secured against UK land or property. But how do we determine whether that security is sufficient? And how do we value it?
Understanding how we assess the value of security is key to understanding the protection behind your investment.
Independent Valuations
Before a loan is approved, we require an independent, third-party valuation of the land or property being used as security. These valuations are carried out by RICS-registered surveyors who provide a professional opinion of the asset’s open market value.
The open market value reflects what a willing buyer would reasonably pay for the asset in current market conditions, assuming a standard sale process.
Realistic, Not Optimistic
We don’t accept inflated or speculative figures. Our approach is grounded and conservative:
- We focus on realistic resale value, what could reasonably be achieved if the property had to be sold.
- We take into account the type, location, and condition of the security.
- If the property is unusual or harder to sell, we may reduce the amount we’re prepared to lend, regardless of the valuation figure.
Maximum Loan-to-Value (LTV)
We typically lend up to a maximum of 60% LTV which means the loan amount will not exceed 60% of the independently assessed market value of the security.
This conservative LTV provides a cushion:
- It helps reduce the risk of capital loss in the event of default and forced sale.
- It allows for potential market fluctuations or a sale under less-than-ideal conditions.
For example:
If the security is valued at £1,000,000, we would typically lend no more than £600,000 against it.
Reassessing and Monitoring
In some cases, valuations may be refreshed if a loan term is extended or if there are changes that affect the security’s value.
We also take a close look at:
- Its location
- Planning permissions (existing or pending)
- Access rights and title issues
- Flood risks, restrictions, or legal encumbrances
All of these factors help us assess the quality of the security, not just its value on paper.
Our Holistic Approach
Valuation is one part of the picture. We also consider the borrower, their plans, exit strategy, and the broader viability of the loan when assessing risk. But when it comes to protecting your investment, the security and how it’s valued plays a central role.
