Property Development Finance

Posted by Mark Chandler on Jun 15, 2020 10:07:23 AM
Mark Chandler

Property development finance is a flexible way of financing the development of commercial and residential properties for onward sale to third parties or heavy refurbishment of existing properties. Typically, a deal can be financed if the business can inject the funds to purchase the land, with finance available up to 85% of overall costs -normally capped out at 65-75% of Gross Development Value (GDV).

Five things to think about when considering property development finance

1. Planning Permission

Planning permission involves many quirks. If you are not sure about the status of your property, the planning portal can help. Your local authority will be able to advise you on how to move forwards with Permitted Development (PD) which includes the type of permission that you will need for each type of property. Once you have completed the paperwork, your conversion dreams are a step closer to becoming reality with the help of development finance.

2. Offsite Issues or Works

Also know as ‘Grampian Conditions’, updated in October 2018, nearby offsite issues or works may delay the start of your project. Pre-commencement condition legislation can be found at the UK government portal. Such conditions might include risk surveys, highway reports, protected species and flood reports -in short, anything that might affect your development, or which might cause your development to affect the surrounding environment.

3.Soil Type

This is one that you want to get right. Soils have different temperaments, and many structural collapses occur as a result of invisible details, such as a thin layer of clay that causes foundational shifting. If you know how your soil is going to behave, both you and your investors can take steps to ensure that the development is going to be structurally safe. Many successful developers say the risks are all in the ground, as they cannot be seen or costed until you start work without a ground survey.

4.Financial Health of the Project

If you don’t have experience of this, don’t panic. At BFS (UK) Limited, we offer this service. One of the reasons that forecasts are important is that they give a true blueprint of the financial health of a project. A solid plan is as good as a robust foundation in property development. You should think about the finance that you can afford to invest, the time that you can commit to the project, and the knowledge that you are bringing to the table for both short-and long-term plans.

5.Neighbouring Land

When it comes to property development, you need to know not only about your own land -you also need to know about everything that borders it. If your development needs an access road –even if this is as small as a driveway –your local council may require the payment of a bond. Make sure that you factor this in when making your calculations and application.

6.Track record

Many lenders will only support development projects where the borrower has a proven successful record of similar developments, without experience it may be necessary to consider a joint venture with a proven developer or contractor.

We’re here to help

In this industry, experience matters and "the devil is in the detail”. What we at BFS (UK) Limited seek to do, with our numerous years of experience, is pre-empt to ensure that you are not embarking on an expensive project. One that is doomed to failure due to an issue that should have been glaring from the outset.

Our experience is drawn from many different financial disciplines, from strategic economics to property law. This means that we have a rounded and informed approach that is grounded in decades of experience.

Want to know more?

Contact us today to talk to one of our property finance experts.

Topics: Property Development Finance

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