Saturday, January 12, 2013

A Brief Guide To Property Development Finance

Whether it is a residential or commercial development project, the very first thing that one needs in property development is a source of funding. Unfortunately, people who do not have sufficient funds in place may need to look for lenders that will provide them with reasonable terms.

Typically, property development finance is needed either to make improvements to an existing property or refurbish and convert a building. It can also be used to purchase a property or land and construct a new building while underwriting the cost. In today's market, it is not always easy to find a lender that can provide funds for development projects.

he rule of thumb when it comes to property development is taking it as a business. Basically, potential borrowers have to think about making money and set this as their main focus. People opt for a property development project in order to generate profit. With this, it will be a lot easier to come up with a comprehensive plan and find lenders who can satisfy the project's needs. Also, borrowers must be able to assess their financial capabilities accurately.

The next thing to do is work on the figures. This means getting quotes for the work needed, legal costs, buying, selling and the financing costs including interest and related fees. Potential borrowers should also take into account other expenses while the project is going on like living costs and bills. These areas are often overlooked in a development project.

All lenders require property development loan borrowers to present a project plan. It should show the lender the project's viability and potential to become financially successful. Generally, lenders will require a detailed application that starts with the project's executive summary. Important details like the timeline, net result, projected sales figures, feasibility studies, costs, design concepts, zoning and site description.