Property development is an exciting and promising investment in today’s market. However, to get started in property development, every investor needs to finance their projects through funding. It can sometimes seem as if there is an overwhelming choice in order to fund a property development, though, and so this guide helps to simplify some of the top methods of funding property developments for the first time.
A Bridging Loan
Bridging loans are the most popular options with developers, which are short term loans that give the investor immediate control over funds with which to invest in property. Bridging loans can be used for a variety of aspects throughout the process, from buying a property to other financial issues throughout the development process. Investors love them because they are able to be used for any type of property, and can be used as a quick fix for issues such as project scope creep and application rejections by other types of lenders. To find a bridging loan for property development, Alternative Bridging Corporation allows you to take out a tailored loan for your commercial or residential project.
A Commercial Mortgage
Commercial mortgages are good options for those businesses that are looking to expand into other premises. Although commercial mortgages are only available for buildings such as offices and warehouses, these mortgages can be taken out for at least 15 years and will allow you to continually develop your project. However, you may lose your investment if you struggle to repay these in the future. Not only this, but you can further fund your property development be re-mortgaging the building, which allows you to take the equity from the property and use this for your own purposes.
If you are deciding to invest and develop a second property, then it is important to consider heading to auction, where you will be able to find cheaper properties to invest in than through other real estate channels. However, in order to bridge the gap between your purchase and your available finances, however cheap it may be, you should consider auction finance which can be given by lenders to allow you to purchase your development without having the ready funds immediately.
Buy-to-let mortgages are best for those that are looking to develop a single property without the necessary funding to develop more than one building. You should choose buy-to-let mortgages if you are planning to rent out the property as this will give you the ability to easily meet loan repayments through this monthly income.
If you do not have the funds necessary for the property development of your choice but are experienced in the property development field, then it is best to consider options such as mezzanine finance. This type of finance allows lenders only to choose investments which they believe are profitable for them as this type of financing creates much more risk for the lender than other types.