> Property Investment > Raising Money
For Property Development
Money For Property Development
to finding the right property, one of the most difficult aspects
of property development is being able to fund the purchase and re-development
of the property before putting it back on the market.
property developers have the skills and flair for property development,
but lack the financial clout to put these into practice. So what
are the options for funding a property development?
A good place
to begin is to talk to your bank or building society about taking
out a mortgage to fund the development, however most high street
mortgage providers are not fully equipped to service the needs of
property developers and are more likely to refuse finance.
A better bet
would be to try one of the niche mortgage providers who specialise
in providing finance to property investors and developers.
by these companies are often repayable on an interest-only basis
and in some cases it is possible to borrow up to 100% of the development
cost, however the developer is often required to own the land on
an unencumbered basis.
It is also worth
noting, that as the risk increases to the lender, the interest rate
on repayments will also increase.
A cheaper way
of raising money may be to borrow from other people, such as friends,
family or colleagues at work.
The core advantage
is that you are less likely to be saddled with expensive interest
rates, but it is important to keep all business dealings above board
and well documented, as it is all too easy for relationships to
go sour if problems occur with the development.
that the savvy property developer might take is to ask people to
invest in the development, so that they can enjoy a profitable return
on the sale.
much of the financial risk from the developer and means that money
can be spent on business expenses and not repaying high-interest
a stake in the development is an attractive idea, it does require
a good level of marketing skills by the developer to find and convince
potential investors to part with their money.
It is still
possible to find low cost properties around the UK, which are much
easier to finance, before working your way up to larger, more profitable
developments. Growing your property development business in stages
allows you to gain valuable experience, reduce your risks and helps
you to build up cash reserves to invest in future developments.
For more information,
please visit our property investment and
property development pages.