Raise Funds for Property Development: Ultimate Guide

By: Aaron Robbins0 comments

Many business owners find property development attractive due to the potential for capital growth and income yield. The nature of property development is complicated and complex, but funding doesn’t need to be. Raising capital to fund residential and commercial developments comes in many forms, including a property developer using their own capital.

Our below guide steps you through what you need to know about raising funds for property development in Australia.

What is Property Development Finance?

Property development finance refers to the financial support utilised by property developers initiating development projects.

Property development financing may be used to acquire land or finance construction projects, such as loft conversions. However, the availability of finance for commercial properties and mixed-use developments may vary depending on the type of funding sought.

The eligibility criteria for development finance can vary widely since different lenders focus on different aspects, including personal circumstances, credit scores, and business plans. It is crucial to assess your eligibility and determine which source of property development finance is most suitable for your needs.

Raising finance for property development

There is a vast array of property development financing options available in Australia. It’s common for property developers at every experience level to access funding to help finance their development plans, from first-time developers to experienced developers.

Here are some of the options for raising finance for property development:

  1. Cash: Personal funds are the most straightforward way to finance property development. Developers using cash may be able to keep costs low by avoiding interest charges.
  2. Buy-to-let Mortgage: If your goal is to generate rental income from the property, you may qualify for a buy-to-let mortgage. This specialised mortgage allows you to rent out the entire property or individual rooms. Buy-to-let mortgages often have different criteria than standard residential mortgages, such as higher deposit requirements and potentially higher fees. They are usually offered on an interest-only basis.
  3. Buy-to-sell mortgage: Standard mortgages typically have a waiting period of two or more years before you can sell the property. However, a buy-to-sell mortgage might be suitable if you desire a quicker turnaround after property renovations. These mortgages often require a larger deposit and higher fees, but they provide the flexibility to sell the property whenever you choose.
  4. Bridging loan: Bridging loans are suitable for shorter-term borrowing needs. They typically have monthly pricing and are commonly used in property chains, where you are buying a new property before selling your current one. Bridging loans provide credit during this transitional period until you can repay the loan with the proceeds from your existing property. There are open and closed bridging loans with different repayment periods, and although they are generally more expensive than standard residential mortgages, they can be used for a wider range of properties.
  5. Property development loans: Specialised property development loans offer funding for the total development costs or gross cost of a property development project, which are repaid over a set period and consider the completed project valuation.

How to raise finance for property development: things to consider first

Before obtaining a loan for financing, it is important to consider several factors:

Project timeline

Evaluate how long the project will take to complete, as it impacts the loan duration and associated costs.

Project budget

Determine the amount required to complete the project, including construction, materials, and other associated expenses such as marketing, agents fees etc.

Market demand

Assess the market demand for the completed project to ensure a market for it, which may affect the potential for selling or renting the property and generating returns.

Profit potential

Consider the potential profit that can be achieved from the property development project, considering the costs involved and the expected market value.

Pre-sales requirement

Determine if pre-sales of the property are necessary for obtaining financing, as this may impact your ability to secure the loan.

Did you know: At DFS, our range of property development finance options come with minimal (to no) pre-sale requirements!

Let Diverse Funding Solutions help get your property development project off the ground

Raising money for your real estate development project is easy when you speak to the team at Diverse Funding Solutions. We provide insight and financial expertise regarding your options for raising capital for property development. We have a proven track record of delivering fast turnaround times on all of our private funding options, meaning that you can apply with confidence that your application will be processed efficiently and effectively.

To begin the journey towards your property development project, talk to the DFS team about specialised property loans and how we can help you!

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FAQs about property development finance

Is a property development loan the same as a construction loan?

Amongst your property financing options, you may come across construction loans. A construction loan is designed to fund the construction of a building, whereas property development finance includes funding to cover the total costs of the development.

Can I secure funding without needing to run a credit check?

At DFS, most of our lending solutions don’t require a credit check as part of the application process. This means that in most instances, your personal credit score nor your business score will affect your loan application.

Can I use my own funds to help raise capital for my development project?

Yes, you can use your funds to help raise capital for property projects. Discuss what’s comfortable with the lending team at DFS. We can help you avoid personal loans or high-interest loans.


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