During our time at the brokerage, we have noticed how easily some clients receive development finance whilst others face various challenges. To stay ahead we’ve created a guide in best practices to ensure as a developer, you secure real estate finance as efficiently and effectively as possible.
It’s important to get the essentials right before you research your project any further. You will need to organise three essential things in order to get your application off to a good start. By getting the essentials in place, you can avoid any mishaps along the way.
The first thing we ask for is a robust CV. We want to know what projects you have completed in the past, what your professional skills sets are, and what makes you attractive for the project you are undertaking. It’s an advantage if you include what makes your project achievable, preferably by showing that you have done something to a similar scale previously.
If you don’t have any experience, it may be difficult to receive any type of development finance. However, if you are investing a lot of equity into the project, this can sometimes be excused. If this isn’t an option, it could be better to build a relationship with a slightly more experienced developer and collaborate on a project with them to gain the experience required. One thing for sure is that you will have to have at least experience or equity. Without one, the chances of securing any form of capital from the financial market will be unlikely.
A full appraisal will be needed so that the investors can understand your proposed project in more detail. This will typically include a breakdown of costs that you expect to have within your property development project. This may cover construction costs, professional fees (such as architectural designs), engineers, and lawyers. Also, an additional cost that new developers may not be aware of, but need to take into consideration, is CIL (Community Infrastructure Levy) payments. Think of CIL payments as a property tax for developers.
Hurt money refers to your stake in the project. It’s possibly referred to as hurt money in the industry as it is the money most at risk, should something go wrong. Think of this in the form of equity, How much would you be willing to put into the transaction and potentially lose? Either way, capital is needed initially and may not be fully recuperated.
Following a successful presentation of the above essentials, Hallcroft will then look to structure the development finance requirement with a variety of funding options available to you. These include:
It may be tempting to take shortcuts throughout the process of finding development finance. However, I have seen many mistakes made during my time at the brokerage. Here are some things you may want to consider to avoid doing:
As we’ve been in the development finance business for over 10 years, we feel very confident in being able to recognise expertise. If you are a new or aspiring property developer, you may come across Banker A. Banker A is telling you everything you want to hear and you’re very excited thinking you’ve found the support you need. However, you won’t be able to identify if Banker A has a good track record internally at their organisation. We would. Hallcroft can help you secure funding for your project from a trustworthy source. We’ve built relationships for the past 11 years and we have access to a great number of investors. We know our investors really well and will be able to pair you with an investor that’s right for you.
If you would like to talk about taking the first step in your development project, get in touch.