Not everyone has the appropriate funds available to get their project up and running when getting started with property development.
This is why the majority of property developers will need some help with financing their project.
From using a mortgage for property development to taking out a specialist loan, here are some finance options to consider.
If you’re focusing on buy-to-let for your residential property development business plan, then a buy-to-let mortgage can be a great way to fund your project.
Buy-to-let mortgages work similarly to regular residential mortgages but require a larger deposit and come with higher fees and interest rates.
You can learn more about buy-to-let mortgages with our buy-to-let mortgage calculator and guide.
Buy-to-sell mortgages can make a good option for those starting real estate development with a buy-to-sell strategy in mind.
Unlike standard mortgages that have long contract terms, these mortgages allow users to sell the property shortly after purchase but come with high-interest rates, higher fees, and a larger deposit.
Property Development Finance Loan
If you’re thinking of starting a property development business rather than working on a personal property development project, then a property development finance loan could be for you.
These loans are typically offered to more established property development businesses. If you’re a first-time property developer, you may struggle with securing this type of loan, but there’s no harm in enquiring.
If you don’t want to use a mortgage for property development, bridging loans work similarly to a buy-to-sell mortgage.
With this type of loan, you can use the money to purchase a property, refurbish it, and sell it.
The money you make through the property sale will hopefully cover the cost of the loan and its interest.
To be accepted for a bridging loan, you need to already own a property or some land.
You also need a clear exit plan to show how you expect the loan to be paid off once the property development is complete.
A personal loan could be your best bet if you don’t think the above options will work for you.
However, keep in mind that it may only be possible to use a personal loan to fund a property with a much lower price than average.
This may mean exploring areas with the most affordable properties or purchasing properties that need a lot more work before they’re ready to go back on the market.