Property development finance
As an established and experienced finance broker, Enhanced Wealth Limited can offer mortgages for almost every circumstance. This experience also extends to commercial finance for property development where we have advisers with the necessary specialist knowledge who can help you finance your project.
Property development loans come in all shapes and sizes and we are confident in our ability to arrange the required finance for property developers. We can help if you need funds to:
- Purchase land
- Purchase property
- Capital raise for other projects
- Finance for conversion projects
- Refinance existing debt
Lenders that operate within the development finance sector tend to be specialist or have a specialist property group within their ranks. These commercial loan lenders actively seek out property development business and are quite prepared to accept the risk/reward of development finance lending; because they have the expertise to understand it.
How do we make a difference?
Two finance proposals for the same purpose, with the same basic fundamentals, may well have differing outcomes, one positive, with the other being negative.
Why? Right approach; to the wrong “person”, or wrong approach to the right person!
Either way, you could be dead in the water.
Our job here is to ensure that your property development loan proposal is communicated in the right form, to the right organisation. We will ensure that the decision maker feels comfortable with the development project and more importantly, your ability to manage it. Never has this been more important than in the current climate, with both rising input costs and falling prices.
Working closely with selected finance providers we are able to offer property development finance for all types of UK projects including residential and commercial. Finance packages are available for experienced developers and also those undertaking their first property development project.
Typically UK property development finance will be used for:
- Property refurbishment
- New build projects
- Property conversions
- Land purchase
As with other commercial loans, property development loans will be secured against the land or property you wish to develop.
Who can borrow?
- Individuals
- Partnerships
- Limited Companies
- Trusts
- LLPs and several less well known business vehicles
How do the products work?
Typically, loans are available over a twelve to eighteen month period in order to fund the land/building acquisition and the development costs. The loan is split onto two parts; up to 70 % of the undeveloped “site” acquisition and 70 % of the build costs, drawn down in stages. This type of loan is known as “loan to cost” funding.
The build costs can include, architects and other professional fee’s, your wages/drawings if you need them, a 15% contingency to cover cost/time overruns, and the interest payments on both loans rolled into the total facility.
The total potential loan should not exceed 65% of the developed value of the project. In effect, these loans take the form of a secured bridging facility, they are not “ term loans”, and are not assessed as such, unless your exit strategy is to retain the developed building, for say letting purposes. The lender will want to know your exit strategy at outset.
What are the interest options available on development funding?Each property development project is individually assessed, and individually priced. There are no off the shelf, standard products, as no two projects are identical. The lender will assess the viability of your project and your ability to see it through to a successful completion. The loan will then be priced on a bespoke basis.
Indicative pricing for residential loan to cost, development finance, will obviously differ. However a good benchmark would be Bank Base Rate + 2% to 4%. In the case of smaller loans, the lender may want an absolute return.
How long can I have the loan for?
The loans are usually set up on an interest only basis, with a term of 6-18 months, depending on the type of project.
When should an approach for development funding be made?
A development funding application can be made subject to planning permission, if you wish. This however carries an obvious risk. We have found recently, a number of small developers, who have started conversion projects using, credit cards or other loans, without a contingency for the time/cost overruns which are common with conversions of older listed building. Please avoid this, as it is very difficult in the current climate to request a development loan on a part finished project.
To discuss your property development finance requirement please call us on 0800 316 5756
Please note that the FSA do not regulate commercial loans or commercial mortgages
