If the bank says NO, DFS can get you a YES!
Without financing, getting any property development plan to fruition is futile. Accessing the funds you need to get your development project off the ground is made easy when you work with Diverse Funding Solutions.
If you’re looking at obtaining finance for property development, we take you through everything you need to know about property development finance.
The property development process is an involved, timely and often costly exercise, however, one that comes with significant financial reward if executed successfully. Property development finance is a specialised form of business finance (or commercial loan), specially-designed to cater to the funding requirements associated with property development.
Property developers raise finance for a property development project in a number of ways:
Often the most straightforward and efficient way to finance a development project is to use cash. However, for first-time property developers, they may not have the upfront capital to be able to cover the full expense of a commercial or residential property development.
Using cash also depletes a developer’s reserves to have sufficient funds to cover any other business expenses, or unexpected costs that may occur during the development process — this is where development finance or a construction loan comes in handy.
Some investment property mortgages have a condition that locks you in for a set period of times (often two years) before you can sell the property. However, property developers often access their profit through selling completed projects as soon as possible after completion.
A buy-to-sell mortgage allows a property developer to sell the property as soon as practical after the development has been completed. However, in exchange for this flexibility, a buy-to-sell mortgage usually has a required deposit amount between 25%-40% of the project value.
Buy-to-let mortgages are similar to buy-to-sell mortgages in that they required a hefty deposit amount, and usually come with higher fees than other types of development funding. A buy-to-let mortgage allows the property developer to create a rental income from the property, either by letting the full space, or partial space of the development.
Bridging loans are a short-term loan that provides finance to bridge the gap between a developer selling an existing project, and purchasing a new project.
When the existing project is sold, the proceeds are used to repay the loan against the new development. Depending on whether you choose an open or closed bridging loan, will determine how long the bridging term lasts.
Must know: If you fail to sell your existing project in the allocated bridging loan term, you are required to repay the full loan amount plus cover all interest charges accrued on the loan.
Property development loans are offered by certain private lenders in Australia, and are an asset-backed, short-term finance solution to fund the cost of either commercial property development or residential property development.
There are two main types of development loans:
Under a total development cost loan option, the loan amount covers the total development costs, including:
Also referred to as the gross realisation value option, this loan option is for the projected completion value of a property development project. Project lenders often lend a higher percentage of the GRV than what most banks are willing to offer.
Diverse Funding Solutions offers finance for Australian business owners, regardless of whether they have any property development experience or not.
At Diverse Funding Solutions, we offer property development loans with terms of up to two years. Development loans are often offered with interest-only repayments.
As development loans are largely offered by private lenders, the lending institution will set the interest rates depending on market factors and information in your loan application.
Good to know: Diverse Funding Solutions have some of the most competitive interest rates in the private lending market.
If you’ve got your sights set on a planned project, you’ll know the ins and outs of your project thoroughly. This information is going to be important when obtaining property development finance from a private lender, such as Diverse Funding Solutions.
You’ll need to ensure that you have:
Financing a real estate development through commercial lending is more complicated than residential lending. This is why it’s so important to work with professionals who have a proven track record at providing property development finance.
At Diverse Funding Solutions, we work with over 200 private lenders to provide property development finance for novice developers right through to experienced developers.
Working with DFS for your development finance means accessing:
If you’re looking to finance property development projects, we can help. To access genuine service and advice on finding the most suitable commercial or residential development loan, contact the team at DFS.