Looking for your next refurbishment project? Whether you are an experienced property developer, an investor or a first-time hopeful looking to complete their very first development/refurbishment project, then chances are you have thought about, or at the very least researched different methods of property development finance.
There are quite a lot of options available to you regarding finance and navigating the landscape and your choices can be confusing, time-consuming, stressful, and difficult – to name but a few! That is why we have put this extensive guide together for you, in it we will list all of your viable options. It is our goal that at the end of this guide you will have enough information to make an informed and an educated decision that will stand you in the best stead for the future.
As the name suggests, commercial mortgages are ideal for you should you wish to procure finance for commercial properties. Examples of commercial properties are as follows:
- Office buildings
- Shops (of various classifications)
- Warehouses/storage facilities
- Virtually any property that is not designated a private residential property
Commercial mortgages are very similar to personal/private mortgages in that they allow you to make a large acquisition whilst spreading the cost of this over a large number of years. By securing yourself property development finance via a commercial mortgage you will have a large amount of money to begin with, which will ensure that you are able to purchase the property you want whilst also being able to make all of the improvements/refurbishments that you want to/are needed from the get-go.
An auction is an excellent way to get a suitable property at a reasonable price. Typically, a lot of the properties that wind up at auction are in a state of disrepair or are in need of refurbishment, so it is an ideal option for you to source your next/first property project. Though purchasing properties this way is cheaper than via an estate agent etc, many people still will not have the necessary funds readily available to make such a purchase. That is where auction finance comes in. With auction finance you can potentially:
- Have the required finance in your account within one week (this is much quicker than most if not all other finance options)
- Secure yourself finance before you make it to auction
- Pay for the deposit yourself and finance the rest of the purchase – even as a first-time buyer!
- Find yourself a specialised auction finance lender to streamline the process further
Bridging Loans/Bridging Finance
A bridging loan is a small loan, usually lent over the short-term, and has been designed to “bridge” the gap between situations. One of the main and most important differences between a typical or general personal loan and a bridging loan is that with the latter, you can have the specified amount in your account within 1-2 days. It is not uncommon for weeks to elapse between a personal loan application and approval/a decision. The main benefits of a bridging loan/bridging finance are as follows:
- Bridging loans are typically offered for the sole purpose of purchasing and then renovating a property, this makes them a specialised aspect of property development finance
- You can use a bridging loan to finance the purchase and renovation of a residential and/or a commercial property
- The renovations that you can then complete with a bridging loan can be complex and specific or far-reaching and massive in scope. This means you can use one to install a new kitchen, or to build a property from the ground up
- They are widely used in property developments and refurbishments alike and are therefore set up so as to facilitate these quickly and efficiently
- You can use a bridging loan to complete the works that you need, and once these have been done you can move the loan to a longer-term product such as a commercial mortgage
- You can have the necessary funds into your account quickly, which means you are able to start refurbishment works as soon as possible
Categorise Your Project
This is a vital step in your property refurbishment journey and will determine which type of finance you will need to acquire. In this industry, there are generally three main project categories. There will of course be some overlap, however your project will almost definitely fall within one of these groups, as follows:
Light works: This is one of the most common and will apply to your project if your aims are to make visual/aesthetic changes rather than large-scale restructuring, adding rooms or moving them around. It can apply to work that occurs on the floors or walls.
Major refurbishment/full renovation: This could involve large scale changes such as the addition of a conservatory, a loft conversion, upgrades to the plumbing/heating system, or the replacement of the internal electrical workings of the home.
From nothing development: This involves an individual starting from nothing i.e. an empty plot of land and building an entirely new property. It can also be used to classify a project that begins with a previously destroyed property, where just the framework remains after a fire, for example.
As we stated in the introduction to this guide, securing yourself property development/refurbishment finance can be complicated, confusing, and stressful. There are so many options to choose from, and hopefully, our guide has helped push you in the direction that is best for you, your ambitions, skillset, and desires! A final thought from us would be to prioritise clarity. Make sure you know the following things off by heart and have planned accordingly:
- The category that you project will sit within (as above)
- The amount of money that you need to complete your project (including a detailed breakdown of each facet of the project and how much it will all cost)
- The length of time that you will need in order to complete your project. Make sure this includes timescales for each aspect of the project
- The materials, tools, etc that you are going to need, inclusive of costs
- Plan for the best and worst-case scenarios
- The finance option that is best suited to you and your project
Once you have completed all of the above it is time to start! Good luck from us. If you would like to speak to us about securing yourself a finance option today, please get in touch as soon as possible.