How to Finance Property Development?

How to Finance Property Development?

Property investors dream of investing in big projects that will give them good returns in future. Property developers usually finance new building projects or renovations of the old building. They can build up luxury homes, convert offices to flats, or develop a commercial building. However, investing in property development projects require a huge amount of money. Finding ways to finance this money can be a challenge.

There are many financing options available. Property development loans are available if you would like to invest in the UK market.  Property business is highly rewarding. It can give you consistent income and you can live without financial stress when you retire. According to a market research, the house prices in the UK have increased more than any other European countries since 1988. On average, the house price increases by 12.3% every year. This upward trend of the property market indicates that investing in UK property market is a wise decision.

Another reason to invest in this market is that there is a huge demand. The Office of National Statistics has declared that by 2025, there will be a shortfall of 1 million housing in the UK. That means that investing in the property market now can give you huge returns in the future and there is a huge opportunity for business growth in future.

How to Finance?

The interest rates have been low for the past six years, so it getting a loan will be cheaper. The mortgage payments are the lowest currently, so if you invest money in this market now you will be able to get good returns. You can rent out the property and enjoy high rental income every month. It is the right time to invest in residential and commercial properties because you will have good rental potential and prospect for a higher property value.

In order to invest money in property development, it is necessary to have sufficient fund. The available fund should cover the in initial investment and the cash flow. The type of funding depends on the scope and scale of the project. For example, if you are doing only light refurbishment then short-term loans will be a good option.  For heavy renovation, you need to go for long-term bridging finance. You can apply for short-term commercial loans as well. To build a property from scratch, you might need to think of several funding options.

Types of Finance

You should choose a finance option according to the need of your property development project. Here we are going to discuss some of the types of finance available for your project.

Personal Savings

If you have significant savings, then you may not need to look out for loans. You can use your cash to buy the property. This is the best option as you won’t incur any interest and won’t have to go through the complex process of borrowing. (more…)