Three Types of Property Development Finance Explained

Posted by Casandra Properties on Tuesday, December 8th, 2020 at 8:32am.

Buying, building, renovating, and re-selling property is not only a very exciting endeavor, it can also become very costly. Having to work with a raw piece of land or a deteriorated old home costs a lot of capital to fix and build. Even though the end result will generate a greater income and profit, it’s getting started which can be the problem. 

This is why many property developers consider property development financing to get them started. If you are a beginner in the industry who aren’t quite sure what kind of financing you should apply for, then you’ll learn more about the three main types of property development finance right here. 

Types of property development


1. Residential Development Financing

This will be a loan that is given to anyone who want to erect or develop residential properties. This is typically to build homes for occupation on raw land with the main aim to either sell, rent out, or occupy yourself. 

These developments can include flats, apartments, small housing units, multi-storied apartments, builder flats, developer’s townships, independent bungalows, villas, and houses in societies or colonials. 

 

2. Commercial Property Financing

These loans are usually given to all kinds of businesses who are in need of financial restructuring, business expansion, or asset acquisition. Commercial properties will include any kind of structure or real estate that is intended to generate an income or profit from the services provided or products sold. 

Spaces like shopping malls, business parks, service provider studios, and warehouses. Basically, it’s a space that hosts business with the intent of generating profit.

 

3. Bridging Finance

The perfect solution for property developers who need a quick injection of cash. This cash loan is usually given to those who are in the process of selling their own property and who would like to purchase their next property. 

It’s also a great option for those who would like to start building their new home, while they are still living inside their existing home. Bridging finance fills the gap while you wait for a transaction to go through. Another great thing about this kind of finance, is that you don’t sit around waiting for a cash injection to do what you want in the future.  

Depending on the loaning company you approach, your interest rates and loan terms will be affected. Therefore, it’s important to consider the following when picking the perfect loaning company for your development project:

  • Interest rate that they offer
  • The maximum amount that they will lend you for certain projects
  • What kinds of plans do they offer?
  • Loaning terms available
  • Credibility
  • Their experience, qualifications, and years in business 
  • Customer care and relationships
  • Reviews and recommendations from previous clients

If you still aren’t sure which one of the three is more suitable to you, then check out this site: propertybridges.com/property-finance/ for qualified companies and experienced agents to help you decide.

 

Why Should I Consider Property Development? 

Many people want to try their hand at this boosting industry, but because it entails so many different moving parts people get easily scared. The great misconception is that you need huge capital to start building properties for sale. This is why applying for a loan at specialized agencies is so beneficial. Without spending all your life’s savings, you can start your own property development company. 

Keep in mind that you don’t have to build 25 homes or a massive skyscraper at first. Many beginners start on a small scale. Getting financing for a small project of building 1-2 two-bedroom homes or apartments is enough to give you experience and get your foot in the door. Average investors usually work on smaller to medium-sized residential development projects. 

 

What do I Need to Be Successful?

Being successful in the industry doesn’t come without inputting some really hard work. You need to have a true passion for developing different structures and ambition to fuel your passion. 

Sure, there are many things you might already know, but there are loads you might not. Within this industry, knowledge truly is power. You have to make sure that you stay up to date with all the latest in the retail market and that you are aware of all the aspects involved in starting a big project. 

Your main aim will be to take an existing piece of land and turn it into an inhabitable space that people would like to purchase or rent. This means, that you have to make sure what people are looking for in housing. Are you choosing the right areas? Are you using the right kinds of materials to be as eco-friendly as possible? And are you following trends to ensure people would find your structures appealing? 

Because you will be committing a lot of time, savings, and energy into these developments you are going to need a lot of patience too. Rome wasn’t built in a day and surely a successful commercial or residential property neither. 

It will be good to know that even though you will prepare yourself as much as possible, there will most definitely be some hiccups along the way. Learn as much as you can before embarking on your new journey and learn while you are on the job too. 

Experts in the field have suggested that beginners should always start small. Start off by investing in developing small residential homes or areas and then work your way up to much bigger projects. This will give you the hands-on experience you’ll need to improve the way you approach a project in the future. 

It’s also important to create trusted relationships with others in the industry. Not necessarily other project developers, but also builders, contractors, and architects. In the end, you will need their advice and guidance. 

 

Money shouldn’t be the one thing that keeps you from reaching your property development goals. Do your homework and find a decent financial loaning company that will give you great interest rates and loan terms. 

 

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