If you are embarking on a property development project for the first time, you are probably already aware of the need for the right type of funding. In fact, property development loans of the right type can make all the difference to the success or failure of such projects.
So what is it important to look out for in providers of property development loans?
• The lender needs to be flexible. Property development projects can be unpredictable – costs can go over budget, colleagues can let you down, unforeseen snags can arise. You need a lender who can allow flexibility in the terms of your loan. One who clamps down at the first problem can cause real difficulties.
• The provider of a property development loan needs to understand your needs as a developer. You are better to look for a specialist property development lender.
• The lender should be able to evaluate a project and assess its potential. Again, this is more likely to be true of a specialist lender. It is a very big step from the planning of a project to when it is ready for sale. The lender needs to understand the site, the market, and the viability of what you are proposing to do. This will determine how much funding you are likely to receive.
• You need a lender for your property development loan who is approachable and with whom you can form a good relationship. The lender may want to monitor your project, especially if you are inexperienced, but if this is done in a friendly way it should not cause a problem. The better your relationship with your lender is, the more it will boost your confidence, and the better your chances of avoiding penalties if your project encounters difficulties.
Of course lenders come in all shapes and sizes, but such lenders do exist. When you discuss your property development loan with your broker, explain what you are looking for in a lender. Property development loans are more than money – the right kind of lender can make a big difference to your success.
Please note that the FSA do not regulate commercial loans or commercial mortgages