UK based experts. Guide to financing for Property Developers in the UK. Options to suit all circumstances. Independent Advice.

Property Development Finance UK – What Do I Need to Know?

There are many different ways of finding Property Development Finance in the UK.  The property market is still one of the most secure long-term options for an investor.  Lenders are keen to capitalise on the rising market-place and the continuing demand for new homes which is fuelling both rental-price rises and property shortages in certain parts of the country.

If you are looking for funding for a development project, then you have a number of options available to you.  There are many things to take into consideration, and these will affect the type of lending you need. 

What information do Property Development Finance Lenders Need?

When seeking funding for property development then you must be prepared to answer a few key questions before you start. This will allow any potential lenders to assess whether their lending is safe and whether they are likely to get their money back from the investment (plus interest of course!)

How extensive and difficult is the project that you wish to undertake?               

Light refurbishment – this kind of project is largely cosmetic and decorative.  Light refurbishment can include replacing kitchens, bathrooms and flooring etc. but no major building work is needed.

 Heavy refurbishment – the project may require some structural work such as moving walls,  plumbing and electrics.  Some heavy refurbishment projects may require planning consent (such as change of use) or expert advice (from heritage protectors for example).

 Ground-up works – basically this involves a plot of land (this includes demolishing and  starting from scratch) and you will need to take note of any planning restrictions or  amendments at all times.

 What are your timeframes – how long will it take?

Time frames are notoriously difficult to calculate, especially when relying on external labour    and subcontractors to do the work.  Prepare to have some hiccups along the way and always take advice from experts as to how quickly the work can be completed.

How much do you think the whole thing will cost?

 You need to factor in all aspects of your development, including legal fees, design costs and  planning applications. The cost of any development can easily spiral out of control,   especially properties requiring major refurbishments where you may not know exactly what  you are dealing with until you start the actual work.

When assessing these three things you should aim to work out both the best and worst case scenarios.  Be realistic about what could go wrong and make sure that you are financially prepared for any problems.  If you apply for Property Development Finance, your lender should be impressed with your planning which makes your application stronger.  You should be able to demonstrate that you have undertaken a thorough assessment of the whole project and that your planning is impeccable.

Most successful property developers will have contingency plans in place should anything go wrong and will have access to an ‘emergency’ pot of money should they need it.  This may take the form of an agreement in principle for additional funds from their lenders, similar to an overdraft facility from a regular bank. 

Using a Property Development Finance Broker to Help Assess My Options

Remember that brokers are there to advise and guide you through all the kinds of lending scenarios available to you.   

 When you have worked out all your plans, costs, and timeframes you will then have a clearer picture of what kind of Property Development Finance that you need.  A broker can help to find the type of loan that best suits your circumstances. For example: 

• If you are looking to ‘flip’ a property quickly and resell it on the open market, then Bridging Finance may be the best option.
• If it is a long term ground-up development with multiple properties requiring detailed planning and design, then it may be that a Property Development Loan will work best.

What Makes Property Development Finance Lenders Different to Other Kinds of Providers

Most loans or financing agreements involve something tangible, so if things go wrong and the borrower defaults on the loan, there is usually an ‘asset’ that can be used to recover most of the money that was loaned. 

With property development the lender is taking a risk on something that is not yet built.  There may be some land ownership but if the ‘development’ itself is incomplete or never started then then the lender could end up significantly out of pocket. 

Our advice, as always, is to make sure you take advice from a professional advisor, especially if you are new to property development.   Our experts have the skill and experience to know which kind of product will work best in your circumstances and will be able to guide you through the different options available to you.