Development finance is the money that funds a property development project.
The finance might come entirely from one lender or it might be a package made up of contributions from several lenders.
That money combined with the developer’s own funds can then be used to purchase land, and assist with project costs including your consultant and construction costs for new builds or renovations.
Typical developer finance is arranged by CPC for properties such as:
A development finance loan is a loan involving a property … but it differs from a regular home loan in two big ways.
First, while home loans generally last for decades, property development loans are often short-term finance packages that have terms ranging from 6-24 months.
Second, while home loans are serviced i.e principal and interest repaid monthly, property development loans do not require any monthly repayments as the lender allows for the interest to be provisioned (capitalised) within the loan funding table.
However, property development funding and home loans do have one big thing in common – the amount of money a lender is willing to lend is based on a professional valuation of the existing land and proposed property. Because the lender needs to be confident that if the borrower defaults at any time during the loan term, it could recoup its money if it had to sell the property.
Just as each borrower and project are unique, so is each lender. Different lenders prefer to work with different types of borrowers and finance different types of projects. They also assess loan applications using different criteria.
That’s another reason why it’s a good idea to get help from an experienced development finance broker – because they can match you with lenders that want to work with a borrower just like you and finance a project just like yours.
As a result, CPC partner with a diverse panel of lenders, which includes:
Banks can often be quite rigid with their lending criteria, which is why CPC often favours more flexible alternative finance sources.
A bridging loan for property development is a short-term finance solution that allows you to start work on a new property development project before selling an existing property.
Once you’ve sold the existing property, you use the sale proceeds to repay the bridging loan.
Bridging loans tend to be interest-only and to have higher interest rates than regular property development loans. But they’re also more flexible in that:
There are three types of property development funding:
As you’ve probably gathered, securing a development finance loan is more complicated and time-consuming than securing a regular home loan.
That’s why it’s a good idea to get help from an experienced development finance broker.
To discuss your commercial development finance options,get in touch with David Lovato.
Phone: 0434 932 634
Email: [email protected]
What are the aims of development finance?
The aims of development finance are to give a property developer the funds they need to build a project and to get the highest and best use out of the land.
The developer may do that by constructing multiple homes, or multiple office buildings, or a mixed-use project that incorporates both residential and commercial construction.
How are development projects financed?
Development projects are financed by lenders who grant mortgages or property development loans.
These lenders can be banks, non-bank lenders, high-net-worth individuals, family offices, self-managed superannuation funds, managed investment funds or corporations.
Finance packages are often secured by finance brokers like CPC.
What is development finance Australia?
Development finance in Australia is the money that funds a development project.
Australia also has specialist finance brokers that have the experience and expertise to help developers get finance, like Crowd Property Capital.
What is needed for development finance?
To apply for development finance, a developer needs to provide documentation about their financial status and experience, and details about the development, like cost projections and expected profits.
How easy is it to get development finance?
Getting a property development loan can be easy if you have a good track record of past developments and speak to the right finance broker.
A finance broker that deals with private lenders may be able to help you get finance when banks turn you down.
Crowd Property Capital Pty Ltd (CPC)
A registered company under the Corporations Act 2001, ACN 600 539 544
An accredited member of the Finance Brokers Association of Australia (FBAA) Member No M-352808
A licensed Corporation under the Property, Stock and Business Act 2002, Corporation License No. 10065109.
A member of the Real Estate Institute of NSW (REINSW)
David Lovato (Sole Director) holds a Certificate IV in Finance and Mortgage Broking and Property Services (Real Estate Agents License No 201 604 57 )