Exploring Property Development Finance Options

By: Aaron Robbins0 comments

Property development is an ambitious and involved undertaking. Given the complex nature of property development projects, it’s crucial that aspiring developers access the correct finance solution to see their project through to successful completion.

If you’re interested in understanding more about the finance options for property development, continue reading as we explore property development finance.

What is property development finance?

Property development finance doesn’t necessarily relate to one singular product or finance solution for property development, but rather, a range of different financing options that developers are able to access to fund the projects. In fact, there are several financial means that are commonly used to finance property development projects.

The most popular forms of property development finance are:

  • Buy-to-let mortgages
  • Buy-to-sell mortgages
  • Bridging Loans
  • Cash
  • Specialised property loans
  • Property development loans

How does property development finance work?

The different forms of property development finance work quite differently from one another, depending on which option the property developer chooses. We detail how property developers raise finance in more detail below.

Buy-to-let mortgage

For developers who are looking to generate rental income from their completed development, a buy-to-let mortgage could be a viable finance option. Buy-to-let mortgages are a specialised mortgage that allow property owners to rent out either the entire residence, or rooms of the residence. This option isn’t available under other forms of specialised property mortgages.

Also dissimilar to other mortgage types, the eligibility criteria for buy-to-let mortgages is renowned for being quite strict. Additionally, the deposit required by most lenders of buy-to-let mortgages is around 25-40% of the total loan amount. Depending on how much capital you have behind you, this may represent a hefty sum — a sum that many first-time developers may not have laying around. Often, the fees on buy-to-let mortgages can be higher than other forms of property development finance, too.

Buy-to-sell mortgage

Another form of property development funding is a buy-to-sell mortgage. If your business plan for your development project isn’t to generate rental income, but rather to sell the property development project at completion, then a buy-to-sell mortgage may be a suitable option.

Unlike most standard mortgages that have a mandatory period of around 2 years before you’re able to sell, a buy-to-sell mortgage allows you to sell the property promptly after the build has been finalised. While this is often an attractive option when developers seek to have construction projects turned around quickly, the fees for buy-to-sell mortgages can often be quite high. Similar to buy-to-let mortgages, the required deposit may also be quite high.

However, some developers are happy to wear those additional expenses for the flexibility of being able to sell when they are ready.

Bridging loans

If you’re familiar with financing the gap between the purchase of a property and sale of your existing property, then you may already be familiar with bridging finance. A bridging loan is commonly used by experienced developers who have a property chain — where the loan bridges the gap between selling an existing development that has been completed, and funding the next development in the pipeline.

Property companies are familiar with bridging finance, as they often have multiple properties being constructed at any one time.

A bridging loan is either an ‘open’ or ‘closed’ loan. The type of bridging loan that you choose will determine the payback period. That being said, bridging loans are usually a short-term finance solution, and as such, they usually have monthly pricing, instead of being charged over annual interest rates. While this often makes a bridge loan more expensive than other forms of mortgage, bridging loans are also available over a wider array of property types, and therefore can suit developers who may be involved in unique commercial developments or residential developments.


Many property developers use an array of property financing options, however, for a select few, they are fortunate to have the cash reserves to be able to use their own funds to finance their development, without lending money. The obvious benefit of using your own money to be able to fund your proposed development is that you avoid interest payments and the need to undertake any finance applications.

If you are in the privileged position of being able to fund the entire development project from your bank account, then this is often the most cost-effective and efficient means of funding your development.

Property development loan

Property development loans are another popular financing option amongst property developers. Unlike construction finance or personal loans, a development loan is specifically designed to finance property developments.

The two primary forms of development loans are Total Development Costs (TDC) and Gross Realised Value (GRV).


As the name suggests, total development cost loans allow you to finance the total costs of your development, including property purchase costs, finance interest costs, property holding costs, marketing and sales costs and of course the construction cost.

If you access a TDC property development loan through a private lender, then you may be able to borrow a higher percentage of the total cost than traditional financiers. With the ability to borrow up to 90% of the TDC, the required deposit amount for your next project can be significantly lower than other forms of finance.


Under a Gross Realised Value property development loan, borrowers instead calculate the projected completion value of their development project, and lend money against that value. Just as is the case with accessing TDC development loans through private lenders, you may also be able to lend up to 90% of the GRV through private lending.

While most lenders will be prepared to lend a higher loan to value ratio under the GRV model, the gross realised value of a development may be significantly higher than the total development cost, particularly if it’s not a ground-up development, and your project is going to significantly enhance the value of an existing property.

Finance your next property development project with Australia’s top private lenders

Whether your next property development project is in residential property development or a commercial property, accessing property development financing through private lending can provide the understanding and flexibility that developers required. Instead of being stuck trying to meet the strict lending criteria of traditional lenders and financiers, private lenders can work with you to understand your unique financial position and devise an appropriate finance solution to see your development project through to completion.

With market-leading interest rates and access to over 200 of Australia’s top private lenders, Diverse Funding Solutions can help you source the best property development finance option to underpin your development success — talk with our experienced team today.

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