Utilise The Common Sense Approach…

Utilise The Common Sense Approach…Utilise The Common Sense Approach…

For any property developer, this is no greater joy than watching a property development project come to life; building the homes from scratch, advertising and then selling the units at a profit is the ultimate ‘water into wine’ scenario.

However, it is often the case that these development projects are either poorly funded, or the cost of the project steadily increases to a point where the initial investment has all been spent, leaving the developer with half built properties that are unsellable and cannot be progressed any further.

A lot of new property developers forget about financing the project and calculating their ROI, and this is a fatal error.

This guide is just for finance, and is not intended to help strategise the project itself.

With some forward planning, the risks cannot be eliminated, but they can certainly be minimised.

For any property developer, this is no greater joy than watching a property development project come to life; building the homes from scratch, advertising and then selling the units at a profit is the ultimate ‘water into wine’ scenario.

However, it is often the case that these development projects are either poorly funded, or the cost of the project steadily increases to a point where the initial investment has all been spent, leaving the developer with half built properties that are unsellable and cannot be progressed any further.

A lot of new property developers forget about financing the project and calculating their ROI, and this is a fatal error.

This guide is just for finance, and is not intended to help strategise the project itself.

With some forward planning, the risks cannot be eliminated, but they can certainly be minimised.

Taking a Personal Loan

Taking a Personal LoanTaking a Personal Loan

This may sound like an easy option but it can be costly in the long term.

Unlike a business loan, where liability is limited to the organisation, a personal loan taken out to service the business’ needs can backfire if the project folds.

The individual has technically taken the loan out in their own name, and will be pursued regardless of the outcome of any business project.

Furthermore, it is unlikely that any personal loan will provide the amount of capital required to see the project through.

This may sound like an easy option but it can be costly in the long term.

Unlike a business loan, where liability is limited to the organisation, a personal loan taken out to service the business’ needs can backfire if the project folds.

The individual has technically taken the loan out in their own name, and will be pursued regardless of the outcome of any business project.

Furthermore, it is unlikely that any personal loan will provide the amount of capital required to see the project through.

Going Into a Partnership

This is a more realistic way of raising some extra capital, especially if the partner is the ‘breadwinner’ in the team.

However, it must be remembered that, like any financial agreement, the profits will ultimately be lessened, and creating and directional input will nearly always be limited when a second party is brought on board.

Remortgaging

If planning on raising a large amount of capital and are considering remortgaging, using a mortgage broker to see the best deals is a must.

This is a source of finance that has come from the investor putting their own property on the line, so the best repayment terms, lowest interest and not forgetting the highest cash offer are of the utmost importance.

Again, however, this is a personally driven finance option; if the corporate side folds, the debt is still payable.

Branching Out In An Existing Company

Branching out in an existing company can be a safer method than personal refinancing, limiting liability for the individual and utilizing funds that would normally be sat dormant.

Selling Properties Before Completion

Rather than sink money into a project and then try to sell the houses, a newer cash flow method involves selling properties at a slightly reduced rate to raise funds and impress potential investors with ‘early sales’.

It is not possible to completely foresee the future, but by utilizing some savvy techniques, the road can be made significantly smoother with less financial outlay by the developer.

Housing Investment: Navigating the Road to Success

By utilizing savvy techniques, developers can make the road to project success significantly smoother with less financial outlay.