A development loan can be structured in many different ways but normally there are three facilities within the loan which can match the borrowers’ requirements during the construction stages. These are:
A full development appraisal normally covers all aspects of the property including legal, planning and due diligence. Most of time however, it is just a financial spreadsheet which helps property developers to calculate the NPV (net present value) of a project.
Preparing a rigorous development appraisal is crucial for every property developer before making an offer to purchase any development site.
An accurate development appraisal is crucial when considering an opportunity. It is very important to input the correct data as developers need to be comfortable with the residual value of the site and the real cost of the project.
For instance, slight variations in GDV, build cost, professional fees and interest cost can completely change the feasibility of the project.
You will need to prepare a full pack of information in order to allow the lenders to analyse the project. At Avamore, we recommend that the pack includes the following:
Development finance is now available to less experienced developers or real estate professionals from the construction industry who have never undertaken a project as property developer.
Most non-bank lenders like us at Avamore are very flexible and creative when it comes to providing solutions and products for market newcomers.
Normally it is a function of the developer’s understanding of the market dynamics and ultimately it depends on very clear concept of the developed product. The best strategies also include alternative options and back up plans.
A clear and rigorous exit strategy is very important when approaching a development lender as it is a good testament of professionalism and experience.