How to get into property development
Property development research
Would you like to orchestrate the development of a building? Buy the land? Finance real estate deals? Then hopefully we can help you on this path for property development. For many people may already know what they want to develop and where exactly they want to develop the building, but on the contrary many will not. So first make sure you have done your research: you need to know the area you want to develop on, this can be one of the harder decisions as it decides how much you can realistically sell the property for, and the people you are selling to. There are 3 main categories of property development: vacant land, residential properties and commercial lettings so this could be a rough guide for what you want to develop. It may also be wise to choose a well-established area where you know, that it has worked in the past so you are certain that the area is well-respected. Also make sure that once you have chosen an area, that you know your target market and what their needs are, as this can sway your decisions as to the features you include in the interior of the property but also how the exterior is perceived b the audience.
Financing your property
Once these initial decisions have been made, next up on the checklist is how you will pay for your property, you do have options. Often you may find yourself in a situation where the perfect property has arisen but you do not have to sufficient amount of money to pay for the property, which could be an auction property where speed is required. In this case a bridge loan may be the right choice, it works to serve those who need to attain money quickly due to a sufficed cash flow. Bridge loans provide short-term loans on the assertion that there will be a long-term plan produced to pay back this loan, normally within 6-12 months but this can be longer or shorter depending on the client.
So this may be the perfect way for you to step into the world of property development as you can purchase this bridge loan with the intention of paying the money back with the sales that are made from selling the property as your exit strategy. You can also pay back after the time required to sell the property where Acorn can link you bank who can finance your repayments. So a bridge loan could suffice for a number of needs you may face on your journey like the purchase of the property or if you have started to build then it could relive difficulties you may be facing with the development in the property.
Acorn has worked with a client who chose to use a bridge loan to finish the competition of a flat conversion. He had made the initial purchase a year earlier and had completed the communal works with the existing cash flow. The first two flats had already been composed and the client just needed money to complete the remaining flats. Moreover, with this progress the loan needed was much less than the actual value of the of property. This led to an interest rate of only 0.66%, and with staged drawdowns, the overall interest cost was also lowered. The loan will be paid back in 9 months time to cover the build time and the time to sell the flats. So from this case study, we see how effective bridge loans can be and how they can contribute very well to the completion of a property and, you can replicate this same success.
About the author
The author’s name is Sola Sowole, she came to Acorn Commercial Finance for her work experience to learn more about the world of finance but mainly finance broking. She was then challenged by Paul to specifically learn more about bridging and then to convert this knowledge into an article, she looked to write an article which would draw the most people to search for it, but also to include all the important aspects of bridge loans.
This article has been left un-edited by Acorn.finance to show the high standard of research and writing a Year 10 student can produce.