How To Finance A Property Development Project
The pandemic has affected property development massively, with strict lockdowns over the past two years bringing many property sales, renovations, and purchases to a standstill. However, as lockdowns lifted and with Government incentives such as the SDLT holiday, the property market has boomed, and now may be the perfect time to invest.
Property development can be one of the most exciting and rewarding processes. Unfortunately, however, developers can frequently run into challenges. One of these hurdles is ensuring you have sufficient funds for the project.
If you are unable to gather all the funding, you will need to review your options and potentially seek funds from a development finance lender such Chordis Capital. We will assist you in providing the necessary funds, whether you’re at the start, middle or end of your project, and ensure the funding process is as smooth as possible.
What is property development finance?
Property development finance is a loan used solely in the funding of commercial, residential, or mixed-use developments. There are many providers, from high street banks all the way to specialist lenders like Chordis. In common with all these lenders will be the need to understand the building project and for the customer to demonstrate skill, experience and the capacity to complete the project.
The way the loan Is structured will depend on whether the project to be funded Is a ground up project or a partial completed project. Typically for a ground up project, the loan will be provided In ‘stages’ which means there will be a drawdown to assist with buying or refinancing the land, followed by a number of stages, as the building work progresses; followed by the sales phase. This latter phase Is where the properties are sold to clear the debt, allowing the customer to take the profit from their project. Sometimes, the developer will refinance the development loan to a commercial or residential Investment lender, because the Intention Is not sale, but rather to hold the property/Ies for the future.
So, whether it’s the renovation or the complete building of one property or many properties, your loan will cover as much of the cost of the land and the project as possible and will be provided to you when required to ensure your development can continue seamlessly.
How To Best Present Your Proposal To A Lender
Most lenders active in lending to property developers will expect a high level of due diligence to have completed before a funding application is made. For example, what are the costs of the project, broken down between land cost, professional costs, finance costs, building costs etc. They will expect to see a cashflow showing the future expected time and quantum of drawdowns. Such forecasts will also need to be stress tested to allow for contingencies both for cost and time overruns. Applicants are usually required to demonstrate experience, perhaps by the provision of a CV and photographs of previous schemes built.
The details around planning conditions and compliance with these will be key, especially when so many planning departments are experiencing significant backlogs at present.
Whether the project Is for a single property or multi will determine the outcome regarding how much funding you will receive and what type of loan you will be need.
Make sure you do your research and stay realistic. Planning a property development project can be hard work regardless of whether you’re doing it individually or as a group. Nevertheless, with the right support from a lender, you can purchase your property and start your development as quickly as possible. Always bear in mind, the first drawdown of funds is only the beginning for the lender and they will remain alongside throughout the whole build monitoring that the project is going to plan.
How to apply for financial support for a property development project
To ensure you have the best support and smoothest process, choosing a well-established lender will benefit you in the long run.
At Chordis Capital, we can provide finance for a range of projects, including Ground Up Residential, Commercial to Residential Conversions and Airspace Rooftop Development. We offer loans up to £6,000,000, ranging from 6 to 24 months terms.
With our extensive knowledge in property development, our specialist team will support through it all, ensuring all potential issues are overcome. Find out how we can help you by calling 0330 202 0109.