If you’re looking to become a property developer, you should understand that purchasing properties don’t come easy. If you have all the cash to invest, great. But if you don’t, you’d have to consider funding options. Even when you have the cash, you’d realise you wouldn’t want to be completely dried up once the deal is over. Moreso, with funding, you can achieve a lot more than your cash can get you.
Professional landlords with a huge portfolio under their belts also understand the importance of property finance. With new stringent measures taking effect in the UK buy-to-let lending sector, new means of borrowing are cropping up by the day. This however, doesn’t imply that generic lending measures are no longer viable. While normal lending channels have those that it’d favour, there are options for those looking to take a different route.
Property development financing options
Here are a number of funding routes you could take for your property development.
Buy-to-let mortgage
This is a kind of loan used to fund the purchase or refinancing of a residential building for the purpose of letting it out to tenants. Buy-to-let mortgages are ideal for first-time buyers and landlords with a relatively small portfolio since it can be used to secure the funding of just one property at a time.
You can borrow a maximum of 85% loan to value (that is, the value of the property), with some lenders capping it at 75%. Also, you get to be subject to a credit check and an ideal interest rate for this kind of loan which is characteristically higher than mere residential mortgages.
Bridging finance
With buy-to-let mortgage measures now tighter than ever for landlords with an existing portfolio, most investors are finding alternative means of funding. One of these means is bridging finance.
Bridging finance or bridging loans is a kind of short-term funding that can be easily accessed and settled over a short period. It is ideally used to settle costs associated with the development and decorating which can be covered normally over a short time, especially when the rents start coming in.
Auction finance
Acquiring property through auction can be a great way to go for new developers on a shoe-string budget. There are lots of lenders presently specialising in auction finance that can furnish you with funding in good time. Going through these kinds of lenders is ideal since you’d need a quick deal as most auctions require the money within four weeks.
Commercial mortgages
Commercial mortgages are strictly acquired for non-residential properties. If you run a business, are currently renting the space you operate from and would like to purchase your own building or the building where you currently stay, then the commercial mortgage is ideal for you. Moreso, if you’re willing to invest in shops, warehouses, or office spaces, you can also go for a commercial mortgage. This kind of mortgage, however, is easily acquired by existing businesses than start ups.
Conclusion
Property development comes in different circumstances, and your particular situation should determine the kind of funding you should be getting. It could also boil down to which plan suits you and what you’re comfortable with. Whichever case, make the right choice.
