Call 020 3393 9277

How Would A Developer/ Builder Typically Finance A Development? Uncategorized

A developer is someone whose job is to develop something. Concerning building and development, it’s buying land, obtaining permits, create building lots, putting in electric and water lines, developing the street and so on. Their job is to develop the project.

The builders’ job is to build and erect the house, from what the developer plans. It’s a lot more straightforward as the developer’s job is to do all the planning.

However, a builder can be both the developer and the builder. They can develop all the plans for property development and also build it.

What Would A Property Developer/ Builder Need To Finance For A Development?

When it comes to development with buildings, there are many things needed for it. This is where finance comes in to help developer builders to achieve the development project. 

Land-To start, any development project; you first need land to build on. This is something that most developers will already have; however, they may want to use a finance option to purchase more land.

  • Materials-

Materials are needed for any development project. 

It’s all the things that build and make up the house, from bricks to windows, doors to floors; there’s so much to include. 

It is an expensive project and depending on the size of the development, depends on how it’ll cost. 

The developer should consider everything that is needed for the development, including all materials and how it costs to purchase them. Finance is used to help fund this, as it can come in no small amount of money. 

It’s usually not something you will have the money for and therefore, will need to borrow some or get a finance solution to help out.

Some of the things included in development include:

  • Bricks 
  • Windows
  • Doors
  • Flooring
  • Electrical systems
  • Water systems
  • Drains
  • Street development and curbs
  • Gardening development 
  • Heating systems 

This is just a few things that need to bought considered and purchased for property development.

Paying for Services-

  •  Along with the land and materials, the developer will also need to pay for services. This is for things such as plumbing, adding in water systems, electrician etc. to come and fit everything into the house.

    It’s something that a lot of developers and builders can’t do themselves and therefore, need to pay someone to do it for them.

    They will likely have regular people that they always use for this, but when you add everything up and paying someone to come and fit and install something, it becomes expensive.

    Finance is used to help pay for this and avoid any delays in the property development project.

Some of the services that might be included:

  • Plumbers
  • Builders
  • Electricians 
  • Gardeners

This is just a few things that need to considered and purchased for development purposes. 

It’s a lot to think about and be included, so this is why a finance solution is used, to help out. If the developer doesn’t have the funds to purchase everything needed for the build, then it can add delays to the project.

Finance Options For Development

As you can see, there’s a lot that goes into development and needs to be purchased to do it. 

It’s an expensive project, but it results in making much money due to the value of the property.

Finance solutions are something that a developer builder will need to have a smooth-running project with no delays. There are a few options available for this:

  • Basic Mortgages-

This is the standard mortgage available at most banks, and the application is based on the ability to pay back loans and the value of the property.

It’s only suitable for a property that you plan to live in whilst completing the project. So, for a full property development project, where the property is being built from scratch, this wouldn’t be an ideal option.

  • Second Charge Mortgage-

This is also known as a second mortgage, and they top up current loans, it’s also based upon the value of the property, but you don’t have to be living it in it, to get this loan.

This type of mortgage is a bit more flexible and open to more people, so developer builders could take out a second charge mortgage on the property if they needed more money.

  • Commercial Mortgage-

This is just like a standard mortgage but used is the property is classed as commercial so things such as shops and offices. This is more targeted at businesses, rather than developer builders and property development.

  • Buy-to-let Mortgage-

If the developer wants to renovate or purchase a property to rent, then a buy-to-let mortgage is available.

As well as building a property from scratch, developers can also buy properties to either renovate them to sell or to rent them out. In this case, a buy-to-let mortgage is available.

  • Residential Bridging Loans-

A residential bridging loan is a short term loan that is very common for property developers to use. The loan can be used to purchase, renovate or even contribute towards the property development project.

Unlike a mortgage, a large amount of money is given within a short amount of time and can be used for a variety of things. So, for a developer builder, they can use it to help pay for their development.

  • Commercial Bridging Loans-

This is similar to a residential bridging loan but instead for the use of commercial properties such as a shop or office.

  • Property Development Finance-

This is a finance solution to help the construction, conversion and refurbishment of a building. 

It’s a short term loan and has some similarities to a bridging loan, but it just aimed at property developers and builders. 

The primary use for it, is to help contribute towards the development project and then the sale from the property, once complete, will pay the loan back.

The primary way a developer builder will typically finance a development project is through a loan, most of the time being property development finance

This is aimed purely at developers and builders and used for development purposes, so it means you can access a large amount of money and only have it short-term. 

To learn more about property finance contact Property Finance Partners on 020 3393 9277 or email: [email protected]

Leave a Reply

Call Now Button Scroll Up