While property development can be lucrative, the lending market and the numerous financing choices are complex, even for experienced investors and developers. Therefore, you must get the right help and advice when borrowing money to fund property development.
At Infinity Loans, we provide you with the best advice on suitable options depending on your goals, whether through a bank or non-bank lender.
There are different financing options for property development, briefly explained below:
The funding availability is the primary reason for approaching a second-tier lender. They typically lend against the property’s completed worth, which means you’ll require less personal capital and can borrow more to pay your development costs – including any unexpected charges.
Second-tier lenders may also be more lenient with their application criteria, but their interest rates are always higher. Most lenders will lend up to 60% of your development or project cost.
A bank lender is one of the first options for obtaining development finance. Banks are your best option if you plan to keep the properties and build to rent.
Banks typically offer considerably lower interest rates, but their funding is limited. In addition, most banks will want a quantity surveyor report to validate development costs. (Depends on the project build Cost)
Land Development Cost
LDC, a common type of development finance, gives funds to property developers to purchase and construct a development property. It covers expenses connected with development but is often limited to 70-80% of the total land development costs of the
project. Before your application is approved and funding is granted, you may be required to fulfill a predetermined level of pre-sales with this financing option.
The most crucial aspect of the development-finance process is obtaining financial guidance early on – preferably from a broker specializing in property investment and development.
Contact one of Infinity Loans’ brokers when you are interested in discussing your property development options.