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Checklist of Considerations before you Develop Your First Property

Looking forward to starting work on your first property development project? Read our guide first so you're fully equipped with the pros and cons of development financing.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2024-06-14
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Checklist of Considerations before you Develop Your First Property

Going into your first property development can be exciting, nerve-wracking and a huge opportunity!

The finance application is the first hurdle to jump, and it's essential you know what lenders are looking for to strengthen your chances of approval at a competitive interest rate.

The checklist below covers all the essential things you need to think about before planning and the most common pitfalls to avoid.

For advice and support with financing your first property development, call the mortgage advisors team on 0330 304 3040 or email us at [email protected].

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  • help If the land was purchased within the last 2 years for less than the current land value, we will lend up to 65% of this figure
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  • The LTGDV is higher than 70%. Please review the Initial Loan (day 1), construction costs and gross development value fields.
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1. Know Your Numbers for Financing Development Projects

Figures and data are critical at the planning stage.

It would be best if you were sure that you would make a profit and demonstrate those calculations clearly to a lender.

  • Don't start a bidding war for a development property at auction.
  • Don't pay higher than you have budgeted for, for a property or site.
  • Don't make an offer that you might withdraw; this can affect your reputation.

Taking on a new development is a big decision, so always take your time to assess the market and make good choices, as once you're purchased a prospective development plot, you may find that overlooking those details causes considerable problems accessing financing.

2. Choose the Right People for Self-Build Development Finance

As a new developer, the advice you receive will be vital. That includes:

  • Development finance brokers
  • Contractors
  • Surveyors
  • Estate agents
  • Solicitors

Ask for recommendations, or speak to past clients before you pick your team. You need to know that the people around you are reliable, experienced and trustworthy.

Including details of your contractors on your application is a great way to show that, even if you're developing your first property, you will have support from professionals who have developed other similar sites before.

A lender might be reluctant to lend to new development. Still, suppose they can see that your architect has designed many other successful developments, and your contractors have developed many other sites on time. In that case, there are fewer risks that the project won't complete to budget or by your anticipated turnaround times.

3. Evaluate Demand for Housing Development Finance

If you're planning to develop and sell a property, you have to be confident that there is a demand for the type of building you plan to construct.

A development that you can't sell can be disastrous, and you'll need to think about the market in the surrounding area, projected changes in the market by the time the build is complete, and what sort of buyer will be interested in purchasing your finished property.

For example, suppose student accommodation is in high demand. In that case, you might be better off converting a residential property into standalone flats than developing a period home into a beautiful family property.

Assessing demand is key to ensuring your projected sale value is achievable and often a deciding factor in selecting those development finance projects with the most excellent chance of selling for a good deal.

4. Other Financing Development Projects Nearby

Should there be other developments ongoing in the area, this can have a significant impact on your exit strategy and the likelihood that you'll be able to sell your property quickly.

Check for other schemes, construction sites or pending planning applications to make sure you know what competition is out there.

There are many reasons this task makes a difference:

  • Suppose you are developing a type of residential property, and another builder is constructing similar homes nearby. In that case, you'll need to know when they expect to bring those homes to market. If your timescales are comparable, you might find it harder to sell or need to reduce your listing price to compete.
  • Demand fluctuates in every region, so looking at the latest market performance figures will help you see whether now is a good or bad time to be selling the property once the development work has finished.
  • Significant developments usually have more flexibility to drop their pricing to achieve a faster sale, so any commercial development projects nearby that directly compete with your project pose a more significant challenge than one-off property work.

In essence, doing your homework and demonstrating market research will help a lender approve your application.

They'll be able to see that you've taken the time to investigate any contributing factors that might impact your development, which gives assurance that you haven't overlooked other essential risks.

5. Know Your Site Before Applying for Self-Build Development Finance

A standard stumbling block for new developers is not to have given enough consideration to critical aspects of their build site - including drains and utility services.

For example, a plot with drains running through the area where foundations will need to be built will cost much more since you'll need to invest in repositioning pipes.

Services are another crucial factor; you need to know what pipes and cables are underground on your site, how to connect to them, and whether any service lines will impact your ability to build to your plan.

Thorough plans and surveys are essential since these will highlight any areas where you're likely to encounter additional costs that must be factored into your development finance application budgets.

Lenders assessing a new development application where due consideration hasn't been given to all factors will almost certainly reject it.

If a prospective developer has overlooked potentially costly works and not included them in their self-build development plans, it doesn't bode well for the project's viability!

Professional Support With First-Time Property Developments

Developing your first property brings a tremendous amount of opportunity. You can gain experience in a professional development market and achieve attractive returns on your investment.

However, the key to success is always to carry out sufficient planning and costings to be confident you've accounted for all the issues you're likely to encounter along the way.

As a first-time developer, you'll also find that:

  • Some lenders won't offer to lend since many mainstream banks will only consider developers with a minimum number of years of experience.
  • Broker-exclusive deals and niche lenders will usually be more competitive since they have greater scope to accept applicants with limited experience.
  • Your application needs to be watertight, including details about your exit strategy and how you're going to repay the development finance once the work is complete.
  • Including information about professional contractors, surveyors or architects is positive since it shows the lender that you'll have backing from experienced tradespeople, even if this is your first development.

Crafting your application can take a little time. Still, you must include all the details that allow a lender to see how your development will work and assess whether your budgets and expected sale values are likely to be realistic.

For further information about applying for a first-time development loan or enhancing your application to improve your chances of success, please Contact the Revolution Brokers team a call on 0330 304 3040, or drop us a message at [email protected].

While your regular bank might have turned down your application, many alternative lenders are offering a range of development finance products that may be perfectly suited to the project you have in mind.

And, as independent development finance brokers with years of experience, the Revolution team will ensure you find them!

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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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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