An Easy Guide to Development Finance
There are 4 main areas that you as a developer must consider.
1. Your Capability as Developer
The bank will want to know all about your experience as a developer. They will want to know what you have done previously, and how many developments you have completed in the past. Do not be concerned if this is your first project. They do understand that there has to be first time!! They may, however, have some conditions such as requiring you to employ an external project manager.
How much equity do you have in the property? The banks will expect you to share in the risk of the project. They will not lend you all the funds. If there is not enough equity they will want you to provide extra security.
3. Who Is Your Builder?
Who your builder is, is very important. The bank wants to feel confident that your builder has the experience to finish the project, as well as the financial security to carry it until completion.
You will need to demonstrate that you can afford the loan. Banks often require pre sales to cover the entire loan amount. The level of pre sales can however, be reduced. The bank will consider your external income, past experience as a developer as well as the location and marketability of the project when determining how many pre sales you will need.
A sound development project is all about having the RIGHT team. You, as the developer will employ an architect, engineer, town planner and even an interior designer. Having an experienced finance broker as part of your team is critical to your success.