| GDV | ___ |
| Initial Loan (day 1) | ___ |
| Total Loan Amount | ___ |
| LTGDV | ___ |
| Day 1 (LTV) | ___ |
| Margins at | ___ |
| Build Term (months) | ___ |
| Minimum Term (months) | ___ |
| Assumed arrangement fee @2% | ___ |
| Admin fee | ___ |
| Exit fee | ___ |
| Net Day 1 Advance (after deductions)* | ___ |
The mortgage advisors team often hears from prospective new property developers - and we've all seen the shows where developers make tremendous profits from fast renovations!
However, like every industry, there are right and wrong ways to get started.
This guide runs through the most important things to know before you invest in your first development property to make sure you get started on the right foot.
There isn't any right or wrong way to undertake your first property development - but there are many pitfalls to look out for. It's therefore highly advisable to seek independent advice from a market-leading professional broker such as Revolution!
If you're looking for competitive development finance lending as a new developer, or need support with understanding which lenders are suitable for you, give us a ring on 0330 304 3040 or drop an email to info@revolutionbrokers.co.uk.
The first thing to understand is what sort of financing is out there and what kind of lending is best suited to the type of property you'd like to develop.
Before you make any applications, you'll need to have an idea about what sort of development you're interested in pursuing and the applicable finance products designed to support that project.
Here are the four primary types of property development, to illustrate the diversity within the sector:
Again, there isn't a one-size-fits-all answer here. One client may be better suited to a specific borrowing product because it aligns with their budget and experience as a first-time property developer.
Another might have equity they wish to leverage as a deposit, and therefore have access to a different range of lenders.
Each product in the development finance sector has advantages and disadvantages, so once you're confident in the project you want to work on and which development finance product is best suited, it's then a case of deciding which lender is right for you.
Our advice would always be to start with smaller-scale refurbishments and expand into more complex and challenging projects as your experience grows.
There are often delays and unexpected costs in developing properties, and so you are much better able to deal with them if you have been there before in lower-risk scenarios.
While there isn't always a prerequisite number of years of development experience, many lenders will be reluctant to lend against a substantial development for a first-time applicant.
However, once you have some experience under your belt, you can scale up your projects and demonstrate to lenders that you have completed successful developments in the past - therefore making it more likely that you'll be approved.
It is critical to invest in the right property to guarantee that your development will be profitable. There are lots of ways you can research the market, such as consulting:
The best way to explore the sort of development opportunities available is to get to know experienced developers or agents in the industry.
When deciding what property to invest in, consider:
Bidding wars are common - agents might have a property that they know is prime for development, and send the details to all local developers to start a bidding war.
It is never wise to enter such a bidding contest, as you can quickly pay far more than your budget, and reduce the potential profit.
You must be sure that you can sell the finished property for more than it cost to buy, develop and finance.
Work through detailed budgets, build in a contingency, and spend time researching the local market to make sure your figures stack up.
To get a good idea of what you could sell your property for, it's essential to know how the local property market is performing.
You can look at what properties have recently sold for a similar size and quality and whether other developments are underway - or have submitted planning applications - that might impact the sale value of demand for your development.
Consider high-demand areas, such as prestigious postcodes, regions with outstanding schools, and how quickly a specific property stays on the market before selling.
Your team is vital, and as a new developer, it is critical to use professionals who have the right experience, credentials, and reputation for ensuring your development goes smoothly.
Ensure that all quotes are in writing and you've gone through the plans in great detail before agreeing to any work beginning.
Check the accreditations of your team members, and seek out reviews of their previous work to ensure they have the right experience and have produced positive results for other developers.
As the developer, the responsibility is yours, so keeping a diligent oversight of every aspect of the project is vital.
Having details of qualified professionals is vital for a first-time development finance application!
Lenders will see this as an assurance that you will have competent contractors working with you, increasing the likelihood of a development that finishes on time, to budget, and with the proper standards.
If you need any support with compiling your development finance application and showcasing the professional guidance you have on your team, please give the Revolution Brokers office a call on 0330 304 3040, or email our friendly consultants at info@revolutionbrokers.co.uk to arrange a good time to talk.
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The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature. We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.
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