Cast your mind back to 2006-7 and the property market was in a very different place. Many viewed property development in the pre-credit crunch era as a sure fire way of turning a tidy profit. Fast forward to 2017, however, and while opportunity remains, developers have to take a more cautious approach – which means securing the right mortgage is crucial.
Understand the local market
Pivotal to any successful development project is picking the right property for demand in the area. For instance, demand will differ in Glasgow’s west end and south side, where 1-2 bedroom tenement flats prove popular with young professionals, compared to the likes of more rural area, such as Ayrshire, where demand is higher for 3, 4 and 5 bedroom family homes.
Understanding the local market also covers the standard of fit and finish that is applied to the property, which is again key as different buyers/renters in different areas will have varying expectations regarding the quality of the refurbishment as well as layout, such as open plan living etc.
Regardless of the size or type of project, when it involves property development, there’s various finance options available.
Many looking to get into property development may well consider purchasing property at auction. The most obvious upside to buying a home under the hammer is that it’s likely to be sold at a heavily discounted price, often due to requiring (varying degree of) refurbishment work.
Lenders who work in the auction finance field can often get developers money much faster than other means, which is useful and necessary as auction houses will often expect payment within a month of the successful bid.
Bridging loans are basically temporary loans; designed with the likes of property development in mind, bridging loans takes a developer from one step to the next – and can be used from anything from a redeveloped kitchen and bathroom all the way through to a complete rebuild/refit of a property.
Designed to for short term purposes, bridging loans differ from, say, commercial mortgages. The biggest plus bridging loans offer developers over traditional term loans is the speed in which funds can be made available; 24-48 hours vs weeks for term mortgages.
Bridging finance can be utilised for property development, but an exit must be in place – often into a full term mortgage.
Securing the right type of mortgage
When it comes to property development – especially for those stepping into the market for the first time – it can make a lot of sense to seek advice from a professional mortgage broker; our team here at The Mortgage Hub are well placed to help first-time developers and landlords alike who are considering making their next move, offering advice on the above types, and other types of mortgages available to those looking at property development.
The Mortgage Hub is an independent mortgage advisor serving the greater Glasgow area. Whether you are planning to buy your very first home and need the right first-time buyer mortgage, or are looking to remortgage due to a house move or to growing family – we understand your journey is so much more than a financial process, it’s a journey to achieve your dreams, improve your lifestyle and achieve your true potential.