Understanding property finance
There’s no doubt the past five years have been challenging for business. The pandemic, Brexit, rising fuel and energy costs have thwarted the ambition of many companies. In particular, construction has struggled, firstly with the quality and cost of materials during the pandemic and later rises in labour, followed by changes to building regulations in 2022. More recently, rises in interest rates and the cost of living crisis, along with weakening property prices, have left some questioning how the construction sector will fare.
Yet, experts are predicting that, despite negative headlines, there are good opportunities for property developers as demand for new homes and rental properties continues to soar. Alongside this, there are opportunities in many towns and cities to regenerate buildings with potential conversion from commercial to residential use. In Norfolk, The Developers Network, which Complete Commercial Finance sponsors, is an excellent opportunity to connect with property professionals and learn about building a successful development business.
In particular, as property prices soften, there is a growing number of buy-to-let landlords looking to exit the sector as the ROI on their pension pot falls. In some instances, properties can be successfully transformed into more profitable HMOs or serviced accommodation. Far from being a desolate space, the property sector is evolving and for those interested in building a portfolio it’s a time to explore new opportunities.
Learn about property development finance
Finance is fundamental to successful property development and understanding the different funding options is an important part of building a successful and profitable business. Working with a broker will enable you to navigate the right type of lending and at a rate which is affordable.
Bridging loan
In some instances, you may need short-term funding such as a bridging loan, an interest-only product up to 75 per cent of the property’s value, which can be arranged quickly, in some cases in less than 24 hours, and enable you to move quickly to secure opportunities.
With a choice of open and closed bridging loans, regulated and non-regulated products, it’s important to understand which type is suitable for your needs and the costs associated with each. Understanding how to use a bridging loan effectively and to port to a longer-term property finance product such as a commercial mortgage at the right time could save you thousands of pounds in interest. A broker can help you to navigate the bridging finance market and make the right selection based on your needs.
Development loan
Once planning permission has been granted on a site, a development loan can help you purchase land and build a property for residential, semi-commercial and commercial use. A development loan can also be used for refurbishment to an existing property, including the conversion of commercial premises to residential accommodation.
There is also specialist finance for developing quality student accommodation, and some lenders are willing to provide acquisition funding for sites which don’t yet have planning permission. Again, a broker with property development experience such as Complete Commercial Finance will be able to help you identify and apply for these types of development funding.
Equity finance
Equity finance, also described as joint venture finance, allows property investors and developers to work together and is a great way to join forces with trusted professionals on the development of a project. It’s important to seek legal and financial advice before entering into a joint venture, and to understand that the financial circumstances of each party will need to be considered by a lender, however, if you are just starting out in property development a joint venture can help you to benefit from each others’ knowledge and experience while establishing a successful business.
