At Enhanced Wealth Ltd we have a department specializing in small to medium size residential property developments, where the goal is profit, and not occupation.
You may have noticed that we have pages explaining the use of bridging finance, and that these products allow for property “development”, so you may wonder what the distinction is between bridging finance and the definition of development finance used on this page?
So here goes!
If there is a building on the land already, Bridging Finance or Development finance may be a suitable option depending on experience and cost; if there is no building present on the land (which must have full planning permission), then the new build development finance route would be the only option.
Who can borrow?
Experienced Individuals, or Partnerships can borrow in their own capacity, or borrow through SPV (Special Purpose Vehicle), set up for the purpose. If using an SPV, a personal guarantee will always be required.
How do the products work?
Potential customers looking to develop property on a small scale tend to find that the door to the Bank is firmly closed. These post recession days, the high street tends to go for large scale big budget deals, which are easy to supervise.
However, there are plenty of other options available to the right “person” and project.
In order to qualify for a property development finance loan, you must have demonstrable experience.
Typically, loans are available to fund the land/building acquisition and the development costs, over a six to twelve month period. Some development loans are renewable, which can be a life saver in the event of an unforeseen time overrun.
The loans are split onto two parts; typically up to 50% of the undeveloped “site” acquisition and up to 100% of the build costs, drawn down in stages. Ordinarily, the total loan should not exceed 50-60 % of the Gross Developed Value (GDV). However, if some additional investment property/s can be offered as security, a higher percentage at any stage may be possible for the right proposition.
A property development loan is in effect a type of bridging loan facility, in that it is short term in nature. As such, any lender is going to want to know, how you are going to pay back the loan; your “exit” route, which need to be well thought out and realistic.
What are the costs?
As each deal is considered on merit, the cost is very difficult to put down on paper. Initial loan to cost, % of build required, eventual gross developed value, term, loan term extension option, and interest retained or serviced; all play a part in pricing.
However, if you have a new build development finance enquiry that you wish to discuss, call us for an initial fee free discussion.
To discuss your property development finance requirement please call us on 0800 316 5756
Please note that the Financial Conduct Authority do not regulate commercial loans or commercial mortgages