The dos and don’ts behind development finance

We have been chatting with Dane Sampson, a Bristol-based developer about his experience over the past few years. Dane has a strong background in development projects and started his journey in 2012. Dane’s portfolio is comprised of a range of refurbishments and developments, now he is sharing with us what he’s learnt about development finance so far.

 What is the biggest lesson you have learnt from your development projects? 

Having done a number of full refurbishments in the past including extensions and running in new services I was fairly familiar with 80% of what was required when moving into new builds.

I would say the biggest lesson I have learnt is to ensure you have the correct professional team behind you. That means arranging a full team including:

  • Planning consultants
  • Transport consultants
  • Architects
  • QS (Quantity Surveyor)
  • Structural engineers
  • M&E (Mechanical Engineers)
  • Solicitors
  • Building control & HSE (Health & Safety Consultants)

These professionals all work together to deliver the project on time and on budget. You want to establish a team who are efficient, reliable and proactive. Not having these attributes can cause all sorts of unnecessary delays.

How does the execution of your first development differ to how you are working now – what are the key changes? 

My first development was self-funded, and I didn’t have a lender so when it came to the larger developments there was a lot of learning to be done with regards to setting up the correct professional team and getting familiar with the full process of development finance.

Choosing the correct lender is crucial and thankfully Avamore Capital in particular where extremely helpful and always delivered on their word. More importantly you are dealt with like an individual rather than a number in a pot and that goes a long way.  I am now a lot more organised and I know exactly what is expected to be produced to satisfy a lender at the early stages of the application process.

What advice would you give to someone looking to take on a development project?

There is a lot of buzz around this sector particularly when it comes to first time developers. I would say it’s extremely important to know your figures, if you do not have experience with pricing up or appraising a development, ensure you employ or partner up with someone who does.

You can also use a quantity surveyor in order to get more accurate build costs. Your biggest risk will be in the ground and it’s the unknown part of all developments. It’s vitally important that you carry out the phase 1 and subsequently phase 2 intrusive ground investigation and geotechnical reports to establish your ground conditions and foundation build up.

Contaminated land can be very costly to remove off site in the correct manner so although you may not know all this information immediately (especially if you are buying a plot of land without the above reports) you need to be aware of the risk the ground poses and allow sufficient contingencies for this. Once you are out of the ground the rest of the project can be measured and fairly predictable in terms of costings provided you have done them right.

In summary you must know your figures, and this goes from the acquisition phase to the appraisal phase and then to the viability (determining the profit margin).

What are the most important factors for success on a development project?

To succeed on a development project, you must ensure you have the correct professional team in place to procure, manage and deliver the project on your behalf.

The biggest and most important fact is to ensure your numbers are correct, that the profit margin is substantial enough and you are not relying on growing market conditions. Ensure you have ALL of your exits finalised before you START. You have to consider all ”what if” scenarios and you have to ensure you have them all covered if the worst case was to happen.

What is the biggest mistake that new developers generally make? How can you mitigate this?

I would consider the biggest mistake new developers make is that they assume it’s ”easy” and ”straightforward’. It is not and it takes years of building experience and dealing with all sorts of different scenarios which ultimately makes the process ”easier”.

Without experience in development or no industry experience it will be a steep learning curve and if done incorrectly can create substantial loss. It’s important that the margins must be in the deal and never to run the figures too thin.

If a project does not stack up put it in the bin and move on, don’t try and squeeze the figures or become emotionally attached. This is a business and has to be treated as such. As long as you have the appropriate contingencies in place the correct profit margins and the firm exit strategies for worst case scenarios then you will have a successful career in this industry.


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