Are you interested in developing property? This can be a smart financial decision in the long term. If you keep up with the latest industry news, you’ll know recent changes to government policy have made this process far easier as well as less risky.
However, it can still be difficult to gain the funding you need when you are untried and untrusted. As such, here are some helpful tips that you should consider in order to make this process a little easier and find the best property deal for you.
New to Property Development? How To Find Your First Deal
Explore Different Finance Options
First, you need to explore the various finance options that are available to you. These include:
- Bridging Loans
- Commercial mortgages
- Development Finance
Each option provides its own benefits as well as limitations. For instance, bridging loans are short-term loans that you can access quickly. However, since they are only designed for short periods, they can result in high levels of interest if you can’t work in a tight time frame. Development finance solutions are useful for those who have a clear strategy with specific properties already in mind. You should consider key details including interest feeds as well as the terms of the finance before deciding which would be the best property deal for you.
Next, you should make sure that you are creating a detailed business plan that you can follow. This will be important when you are working to get investors on board. Your plan should cover:
- The investment strategy
- Expected returns
- A complete timeline
Once you have the right plan laid out, you will be able to present it to investors. A clear plan will always help to mitigate levels of perceived risk. A skilled property consultant can help you create the right plan you need here.
If you are investing in property, you will always need to research different lenders on the market. This includes banks, private investors and alternative lenders. You should think about their appetite for risk, reputation and financing criteria. It is important that you work with a lender that you can trust and that you feel comfortable with for a long-term financial relationship. This research will enable you to analyse which option would be provide the best property deal for you.
You might want to consider exploring a joint venture or equity partnership. As well as allowing you to manage the risk and share it equally, it can ensure that you are able to access the capital you need far more quickly. However, do be aware that you will also be sharing any potential rewards of property development. As such, it limits your profit potential.
Another option would be to consider government-backed financing solutions. There are various examples of this available including the Enterprise Finance Guarantee Scheme. This can provide guarantees for loans that are suitable for small and medium-sized enterprises. You can read about opportunities like this in various property development books.
One of the best ways to mitigate risk for your first property development would be to use personal savings or to borrow from a personal source. The big benefit here is that you won’t need to worry about interest rates because you’ll be borrowing from yourself. However, you do need to understand that if your investment isn’t a success, then it can put you in financial jeopardy or put a strain on the relationship with whoever you borrowed from.
Peer-to-peer lending and crowdfunding solutions can provide you with the opportunity to gain the capital you need for an investment quickly and effectively. This will help you secure the financing you need for your first deal. The only issue with crowdfunding is that it has become a popular choice for a wide range of potential investors and business owners. As such, it’s difficult to gain the level of support you need in such a highly competitive market.
Finally, you need to find the right broker or financial advisor to help you find the best property deal for you. The property market is a complex landscape and one where it is all too easy to feel lost or confused. A skilled broker can help you navigate around the pitfalls and avoid some of the common issues that people tend to fall victim to when exploring these types of investments. They can also ensure that you are able to identify investment opportunities that match your goals and objectives as well as your financial limits.
We hope this helps you understand some of the key steps that you can take to ensure it’s easier to gain the funding you need for your first property development. If you’re looking for more information on how you can break into the UK property market, don’t hesitate to get in touch. As an expert property developer, John Howard can provide the recommendations you need to ensure that your new financial investment is on the right footing from day one.