Property development finance, commercial and residential

Property development finance for conversions or new build property

At the time of writing, four out of eight adverts on the first page of Google for the search term "property development finance" say that 100% funding is available. The reality is that for an inexperienced developer, 70% would be a fantastic result, and 60% much more likely.

There are circumstances where 100% property development finance might apply:

Profit share scheme; we have a Building Society that will fund 100% of purchase and 100% of build costs in return for a share of projected profits. The share is agreed in advance as a fixed amount of money, if you make more profit than anticipated the lenders share does not rise, if you make less they will still wan't the amount agreed.

Equity finance is possible for larger projects of £1,500,000 and over, you could use a bank to fund the first 70% and then a specialist lender will finance the remainder in return for a share in the profits.

Property development finance consists of site purchase and build cost's, if you were to purchase a site for say £280,000 that had a market value of £400,000 (unlikely) then yes you might get 100% funding.

Once you own the site, YOU will need to fund the first building stage. If you spend £70,000 and the site increases in value by more than £100,000 (it should) then you will be able to draw 100% of those cost's.

Lastly, if you have other assets (probably your home) that the bank can take as sufficient security, then you will be able to get 100% funding.

The reason that bank's want you to put in a large slice of your own money is simple; property developing is a risky business even for experienced professionals.

Why would I want to talk to Finance4 about property development finance?

We will if possible help you to avoid the lenders that specialise in short term property development and bridging finance. Where possible we will try to arrange your development finance using a "high street bank". A specialist development finance lender would look to charge a monthly interest rate of close to 2% per month, plus a large arrangement AND exit fee. We would be seeking a deal something like bank base rate (BBR) + 2%, with an arrangement fee of 1% and with no exit fee.

How do we get our clients the very best deals for property development finance?

The answer is our contacts, and our help with your presentation. As well as the usual requirements of an application form, a good presentation will contain the following information:

Purchase price for the site

Development cost's in stages

Final value and increase in overall site value at the various stages of development

Timescale's from site purchase through the various stages

Details of any planning permission

Site plans

Architects drawings

Project managers CV

Builders CV

Developers CV

Developers assets and liabilities (personal and business)

Developers business accounts

With the above information presented in a concise easily read format, the bank loan officer can make an informed decision on the level of risk. The risk level determines whether the bank will lend and at what price.

Please call Finance4 on 0800 019 9605 for help in making your property development plans reality