How to use your development finance to make a profit
If you are thinking of developing a site, be sure to choose the right location to maximise on your return
It's almost impossible to guarantee a return on your investment, however solid it looks. As an investor you are largely at the behest of the market. That's why it's important to always assess the risk you may be taking with the finance you have available for development before you commit to investing it.
By doing some thorough research and using your experience there are some things you can do to minimise the risk of developing land.
Location
Choosing the site you are going to develop is perhaps the most significant factor
in the whole process. You need to consider what sort of site you are looking
for. Are you going for a site that already has properties on it which you are
going to demolish and rebuild? Or are you just looking for empty land which
has planning permission for you to build on? If the site is in the middle of
nowhere, you will have to have very good ideas about what you are going to build
there, otherwise your development finance specialist could be reluctant to lend
you money. Similarly, if your plot of land is surrounded by other buildings,
you need to consider what type of property is likely to be most sought-after
there, and consequently, give the most returns.
Residential
property
If you decide to build a residential development, make sure you have thoroughly
researched the housing market and what type of house is likely to popular in
that area. It is no good building lots of detached family houses if it is predominantly
young professionals or students who live there. You will have to supply details
to your development finance specialist on what you intend to do with the properties
once they are built. For example, are they going to be for rental or sale purposes?
Commercial
property
Again, the location is all important here. You should investigate the type of
businesses that are in the surrounding area already. This is especially important
if you are going to develop the site for retail and leisure purposes, because
if it is something that the public wants and will use, you can raise very good
rents. Be careful not to make it too controversial, however, or you will struggle
getting planning permission from the local authority and funding from your development
finance provider.
At Abbots Finance we specialise in arranging development finance for residential and commercial ventures. Call us now on 0870 2401957 to see what we can do for you.