If you are thinking of constructing building on a land or renovating a house, the first thing you need is finance. But it is not always at your disposal. Then, how is someone to go around the problem? The solution lies in Property Development Finance. You obtain a Development loan to ‘develop’ your land or property.
Conversely, this is different from a Construction loan which is just for building or making improvements. Whereas, there is a lot more that you can do with a Finance loan. All excavation work, infrastructure including sewers and roads and even holding costs of the property can be catered to with a finance loan.
Real estate development or property development is composed of several faces of business. Renovation of buildings, release of existing buildings, sale of land that has been improved and purchasing of new land are the different sectors of business that can be financed by banks and different lending financial institutions.
All such property development activities are managed and coordinated by developers.
CYCLE OF PROPERTY DEVELOPMENT FINANCE
The property development cycle usually begins with purchasing a land, then developing the building program and design by getting architects and engineers on board, obtaining the required approvals to get financing, getting the structure built and then putting it to your use or selling it in case you are a real estate developer. During the property development process, you have to engage with city planners, surveyors, contractors, inspectors and leasing agents.
RATES OF DEVELOPMENT FINANCE
The rates of property development finance vary depending on your experience in the real estate business, the nature of your proposal and the industry sector but a base rate of over +5% is an appropriate benchmark. The term of the property development loan is usually one year plus, but it depends on the nature and size of the project.
A good percentage of the purchase price plus build cost can be covered with these loans. The funding would typically range between 55% and 70%, depending on projected property development values. But if you already own the land, it is possible to obtain a loan which finances 100% of all development costs. Even after the loan has been obtained, it is possible to revise the agreements of the loan to get additional financing.
FINANCING AND DEVELOPING OF PROPERTY
Apart from the plans to develop or renovate or design of the building, it is equally important to find the right bank or financial institution; the lending institution that offers competitive rates and favorable terms and conditions to help develop the land. Financing for property development is a cumbersome task and you need to select the bank or lending institution that is able to provide exemplary customer service with maximum benefits and has the expertise to guide you with the project.
Unless, you are a qualified developer it is best to hire the services of professional developers because eventually the success of the project rests on the shoulders of the developer. The professional developers own responsibility of building, imaging, creating, controlling and coordinating the project.