Property Development Finance for Renovation Purposes

Property development finance for inner city regeneration projects is getting
easier as more lenders are starting to realise that there are high profits to be
had in helping property developers fund projects.

Run down areas of inner city or town centre locations are often the best
investment, particularly if they are surrounded by better quality housing.
Finding a development project in a regeneration area can see an immediate profit
potential of 10% to 20% above other similar projects.

However investors still need to do some careful research and check there is a
well-funded renewal plan in place. Areas such as Stratford East in London, parts
of Manchester and inner city areas of Cardiff all have regeneration schemes in
place and are proving irresistible to investors and buyers. A good example of
the perfect regeneration project would be an area like Stratford in London with
the 2012 Olympics being hosted in the area.

The levels of applications for property development finance, specifically for
regeneration areas are exceeding all records. There is no doubt that developers
are realising that brownfield sites represent the best opportunity. This is
because it is far easier to develop a brownfield site than go through all the
hassle of applying for planning permission to develop a greenfield site.

Finance for property development in regeneration areas is often calculated
based on the anticipated increase in overall value once the whole scheme is
complete. The property developer should be prepared to answer far more questions about the scheme as the lender is likely to be very careful to ensure the scheme complies with local planning requirements.

Mortgage lenders have improved their product offerings to accommodate the
inner city type of property, this includes helping property developers arrange
mortgages for residential dwelling situated above commercial premises. In
particular the buy-to-let mortgage has really come into its own in this
environment. It is not unusual to see an entire development of apartment being
snapped up by investors before the project is even ready for viewing.

When researching the property development finance options available it is
vital that the builder tries to use a specialist broker. The mainstream
residential mortgage broker is sometimes tempted to dabble in commercial
finance, usually attracted by the idea of large commissions. In reality
arranging finance for property development is a highly skilled job, and relies
on experience and personal contacts. Property developers trying to arrange
finance for regeneration projects are also well advised to try to use local
brokers wherever possible, this is because a local broker is more likely to know
of any regional issues which may adversely affect the project.

Local and central government and the EU often help fund larger regeneration
projects with grants and subsidies, or by providing infrastructure improvements
such as transport, schools and hospitals. Seeing publicity about these types of
schemes is a sure indicator that the area is ripe for speculative development.
It is worth bearing in mind that some of these larger projects can take several
years to come to fruition, so it pays to plan ahead.

It is quite likely that the property developer will also need to consider
bridging finance as part of the overall property development funding package.
This is because property development finance is not usually available for purely
speculative deals, especially where there is no planning consent. Bridging
finance can be used to secure the purchase of a site at a discount whilst the
value is enhanced with planning permission.
Find out more about property development finance by talking to a commercial finance broker. Spectrum Business Finance have been arranging bridging finance property renovation for over 5 years and have the experience to accommodate most circumstances.