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Residential development finance is finance that you would take from a bank or financial institution, residential property development is a business activity that property developers do in order to make a profit from reselling the properties. Most developers start out with a small refurbishment project simply buying a property and doing it up for resale, these can be located either in your local property auction or looking online for suitable properties on various websites such as rightmove or Zoopla, both of these websites are also excellent places to look for land for sale as well. Many developers will stick to refurbishments rather than full-blown new builds as they are relatively easy to work on and can be turned around far quicker than a new build project, a simple refurbishment could easily be purchased refurbished and sold on in as little as three to six months, with a new build even a single house it would take a minimum of six-nine months to build and sell the property and this is assuming you have planning permission and all of the conditions discharged, this alone could take up to nine months so if you are looking to turn a project around quickly make sure detailed planning is in place beforehand.
The reality is that if you are going to are developing new build properties you should factor in at least a year from starting on site to achieving sales, residential development finance is really for developers who are building new builds or doing substantial conversions of a property into multiple units, with development finance you take the loan in stages as and when you have completed a certain amount of works, that is then evaluated by the lenders quantity surveyor this part payment of the loan would typically be an amount to your site acquisition costs, and then payments either based on the number of works completed at any one time or on a monthly basis.
With a refurbishment loan these are generally smaller from say £25,000 and would be offered by a bridging finance company, with this type of finance the loan is secured against the property you are buying and rather than being paid in separate sums the lender will give you all of the money on the day you draw down the loan.
Self Build residential development finance as rather more complex than a straightforward property development finance, in that if you intend to live in the property after completion or any of your immediate family then this becomes a regulated loan, as it is not a business proposition it is governed by the same rules as if you were taking out a personal mortgage and any lender will need to go through the same affordability checks as when you take out a traditional mortgage, this is not a problem and there are many self-build lenders in the marketplace offering self-build mortgages, this allows you to fund the building costs as their occur and in many cases will them revert to a traditional mortgage.
Who can apply for Residential Development Finance
Anyone can apply for residential development finance the key is to actually get an offer of funding basically if you approach a high street bank they will usually insist that you put at least 40% of the costs into the project and so leaving them to fund the remaining 60% however it is not always as simple as this some lenders actually insist that you deposit the whole of your 40% contribution on day one and they only fund the 60% at the back end, furthermore if you are not an existing customer or have little or no property development experience then you would not even be considered for a loan with them.
In the current market most residential development finance, is provided by specialist lending institutions even for experienced developers these lenders offer more flexibility on how much of the costs they will lend some even going up to 90% of all you spend although you will have to pay an increased interest rate if you wish to borrow that percentage.
Specialist lenders are also far more relaxed about offering finance to first time or developers with a small amount of track record behind them, as long as you can demonstrate that the project you are looking to finance is viable and shows a good profit margin there's usually a lender who would be in a position to offer you terms to finance your deal,
What can you do now?
Give us a call and we will go through your requirement in more detail and then be in a position to offer you terms from any lenders we know that would be interested in financing your project.
Get in touch you can call us anytime 24/7 or fill in the form on this web page and we will contact you to provide your quote.
With over 20 years experience you can be assured of the very best help and advice from our team.
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