Beginning a development project is a significant milestone in the property industry, whether it's a small-scale residential build or a larger commercial venture.
Financing a development project typically involves several steps, from acquiring the land to funding the construction phases.
Preparation for the Project:
Before seeking financing, thorough preparation is crucial. This includes developing a detailed business plan, conducting market research, and preparing financial projections. Understanding the specific requirements of your project, such as environmental considerations, zoning laws, and community impact, will also play a significant role in securing finance. It may be best to investigate other development projects in the area of similar size and scale, as they may have some insight into how a project may turn out.
Depending on the development project, you should have key experts lined up for the different stages. If it is townhouse development, having an experienced builder and surveyor working to ensure the project will get from planning to construction will be key. Other experts to involve may be an engineer, earthworks team, or an architect. We would recommend you always consult an accountant and a lawyer as well, to ensure you are not putting yourself in a position of too much financial risk, or other issues.
Funding:
Your funding structure will depend on your deposit. Are you looking to buy the land outright? Or are you putting down a deposit for the land and then securing funding for the project? there are many different ways to structure your lending.
For many developers, looking past the main banks and towards non-bank lenders is a popular way to secure funding, as main banks have different lending criterias that often do not favour development and construction projects. However, if your project is small, a main bank may still be the best way to go. Each lender offers different products and services tailored to development projects, each with their own set of criteria and benefits. However, non-bank rates can be higher than those of traditional banks.
Secure Land:
Once you have looked at your financial projections, type of development, location, and other personal factors, it will be time to secure land. Make sure you utilise websites like trademe.nz, realestate.co.nz and also get in touch with real estate agents, as they may have off-market listings or commercial sites that are soon to go to the market. If your project is a residential development, look for sites that may be close together, or larger sections in correctly zoned areas. Buying two properties next to each other is a great idea to maximise the space, but take into account the need to go through extra council consents to sign off the land for development across multiple titles.
Once you have land you like or are eyeing up, get in touch with us so we can get your finance underway. Of course, securing a pre-approval may be a good way to go but talk to your adviser first, so they know what will work for your situation.
What Next?
If you've made it this far, congratulations! You're ready to get your plans underway, and see your development take shape. At ConstructionLoans.co.nz, our expertise lies in navigating the complexities of development finance. We work closely with you to understand your project's unique needs, offering personalised advice and connecting you with the right financing options and industry experts. Whether you're looking at traditional bank financing or exploring non-bank lending solutions, our team is here to guide you every step of the way.
If you're ready to start your development project but need assistance with financing, reach out to us at 0800 100 300, or visit our website, www.constructionloans.co.nz. Our team is ready to provide you with the expert advice and support needed to navigate the financing process, ensuring your project gets off to a strong start.
