Types of PropertyProperty Development Finance & Loans Glossary Of Terms Development Finance.
Glossary Of Terms
How Much Profit?
As a general rule Property Developers look for 20% of profit, some developers work on costs and others on the end value. So if you spent £200k and you want £40k on costs the end value of the property needs to be £240,000 giving a profit of £40,000 if you are working on 20% of the end value then you would want 20% of £240,000 giving a profit of £48,000, when you apply for property development finance you will have to take this into account, also many lenders now look for at least 25% profit margin.
Property Development Finance What do these terms mean?
GDV
GDV stands for Gross Development Value of the scheme; it basically means “what will the properties sell for?”
Drawdown
Drawdowns are the points at which you take stage payment from the Development Loan, usually once per month, but they can be whenever you want.
Sq. Ft/ Sq. M2
Used to value property and also work out ball park costs. It can be Gross or Net and excludes garages. The difference between gross and net can be up to 10% so beware.
Property Development Loans Commitment/ Arrangement Fees.
A fee agreed when arranging Property Development Finance, normally paid when you agree to take the finance to show your commitment to the lender.
Exit Fees you will pay on a Property Development Loan.
Paid on the sale of the properties, this can be a percentage of the Development Loan amount or the end value of the property. Obviously, the latter is a lot more expensive.
Schedule of works to get a Property Development Loan.
This is a list of all the works you intend to carry out on the development. It is given to a lender for Development Loans.
Cash Flow
This is a breakdown of all of your outgoings set to a monthly program pre-agreed. With the Quantity Surveyor, you don’t always have to keep within this, but it sets a goal.
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