Development Finance Options for Property Developers
Property developers have been hit particularly hard by the recession; reduced financial products, declining construction sector, and tightened lending by banks have meant it ever harder to successfully start and complete projects. However, although banks have on the whole stopped lending for speculative development investments, there are a number of lenders who remain active in this market with a variety of finance products (http://www.imperial-blue-finance.co.uk/commercial/development-finance).
Auction purchases
For auction purchases, short term finance is available often within 24-48 hours and whilst typically up to 80% of the property can normally be funded, in certain circumstances 100% funding is available with additional security required. Whether it is used to pay the deposit on the property or to pay for the property for a number of months until it is sold, or developed, there are a range of options if you know where to look (http://www.imperial-blue-finance.co.uk/commercial/buy-to-let>mortgaged).
100% lending
For some lenders the funding available is based on market value of the property rather than its purchase price typically with a maximum loan to value is 75% if there is no determined solid exit. This means that if you can pick up a property at 75% of its market value then you could get 100% funding on it. If you have already lined up a buyer or an exit of sorts, then you could get up to 85%.
Pay interest at the end of term
Interest is also favourable as long as the term is kept short. Interest for such short term finance is charged at an interest rate starting at around 0.75% per calendar month, increasing to 2% per calendar month depending on certain criteria including, but not limited to, the term of the loan, the loan to value, and if it is a first or second charge. The products are continually changing and thus it is worth engaging with professionals to get the best deal for your specific needs (http://www.imperial-blue-finance.co.uk/why-use-us).
Ground up developments
There are products designed specifically for purchasing and developing a property whereby the lender pays for a percentage of the purchase price – 40% for instance - then pays 50% of the gross developed value. For those wishing to bypass renovating a property and instead purchasing a plot and developing this, there is opportunity through private lenders for this as long as the developer is prepared to put in a certain percentage of the costs, for instance 20%.
Private sources
It is worth noting that some products are from private lenders, and as such will often only lend through intermediaries. The criteria is less stringent although the application process is very similar (www.imperial-blue-finance.co.uk/commercial/apply-now).
Provided a developer has something to put into the project, be it a high value piece of land, a building that needs renovating, or a small proportion of the overall costs, then there are options available for new and experienced property developers alike. With fewer developers and lenders in the market, it also presents greater opportunities, more independent products, and more competition.
Imperial Blue Finance is an independent financial institution that helps provide funding for individuals and companies and property professionals. IBF also facilitates off-market commercial property transactions, and off-market luxury residential transactions. For more information visit www.imperial-blue-finance.co.uk.
Imperial Blue Finance is an independent financial institution that helps provide funding for individuals and companies and property professionals. IBF also facilitates off-market commercial property transactions, and off-market luxury residential transactions. For more information visit www.imperial-blue-finance.co.uk.
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