However, the variety of ways in which to manage and fund a larger project can be a tricky to navigate, particularly if you have limited experience. There are many other pitfalls to avoid too, and there will always be a certain amount of learning 'on the job' required.

Having personally developed a number of properties and working with many others who do, and also finding finance for developers, I have a unique view on property development from both sides of the fence. These 10 tips will help to put any serious property developer on the right path when raising development finance, from the initial purchase costs all the way to the project’s completion.

1. Do your research

It’s important that you and your team, thoroughly understand the development. One of the common mistakes that potential developers make is choosing the wrong area for a build, and rushing into a project blind. If you’ve done your research and asked the right questions, you’ll get a more accurate idea of the area and its potential, and you’ll be less likely to have problems down the line.

2. Get planning permission

Unless you are doing a Permitted development Scheme (PD) of a commercial conversion – offices to residential for example -  planning permission is paramount in the development process. You should initially determine whether your intended development will require planning permission by contacting the council. It can be a long process, depending on the nature of the development.

Whilst lenders can arrange finance subject to planning permission, it will mean nothing if the permission is not granted, and could be more costly as a result.

3. Prove your experience

All Lenders love to work with developers with past experience. This is why they’ll often ask for your CV and the CVs of other members of the development team. If you have a background in delivering development projects, it'll be favourable for your case. On the other hand, if you’re a first-time developer, you’ll need to show you’ve done your homework and are able to contribute, either through bringing on an experienced team member  as well as your own cash to the project.

4. Get competitive quotes and budget for contingencies

Whether you’re using your own workers to conduct the build or you plan to hire external contractors, you should get competitive quotes that work to your budget. The costs of any development can quickly pile up, and it’s also good practice to factor in the risk of going over-budget or overrunning on time. And by including a contingency in your spend — usually 10–15% either way — you’ll be better prepared for any unexpected costs along the way.

5. Find your funding options – 12 things to think about

Top of Form

1. What is the legal status of your business?

2. How much finance do you need? 

3. What kind of development is it? 

4. How quickly do you need the finance? 

5. How long do you need the finance for? 

6. Do you have previous experience of property development? 

7. What kind of planning permission do you have for the development? (if any) 

8. Do you own the property or site? 

9. Has the building work already started? 

10. What security can you offer?

11. What happens at the end of the project? Are you planning to sell or rent or lease?

12. Do you have any other unencumbered property you can use as security?

Bottom of Form

6. Own the site outright if you can

Having outright ownership of the land or property that you’re planning to build on is a massive boost to your application. An unencumbered asset is owned land or property with no existing mortgage or term loan over it — lenders can often provide up to 100% of the development costs in these instances.

7. Fill in the documents requested fully and carefully

You should complete the information requested meticulously — incomplete application forms show a lack of interest in the project and reflect badly on your funding proposal for the development. Be robust and thorough with your application.

8. Fund the Developmenent appropriately

There are many different ways to structure the required development finance for your project.  Solutions are flexible — they can work to different build schedules and different abilities to make repayments. A common option is to use short-term finance for purchase and build costs, commonly referred to by lenders as bridging finance, and then 'exit' into a longer term loan or commercial mortgage.

There are many competitive lenders in this market with different appetites for lending, according to geography and the development project at hand. However, bear in mind you’ll need an 'exit' planned from these short-term loans, such as selling the property or a refinance onto a long-term mortgage. We can help discuss these options as your application moves forward.

9. Consider getting a project manager

Although they’re an additional expense, a project manager could actually be a saving overall. As well as being a liaison between different teams of contractors, they can make a huge difference to how well you stick to your budget and timeframe, and help you avoid unexpected costs. Experienced project managers could also prove useful if you’re new to property development or you’re embarking on a new type of project that you haven’t done before — giving you peace of mind that your project will be a success.

10. Be realistic and up front

Being honest about your experience, abilities and financial standing will ultimately benefit your application. We can help you understand what to expect when taking your application forward to potential lenders. There are many ways to develop property — the best of which will depend on the nature of your development. Raising property development finance an often used and sensible method for funding a development project.