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Getting Started, Raising Finance and Beyond

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  • Getting Started, Raising Finance and Beyond

    I am keen to get into property development and have read many articles and books on the subject, but I am struggling to find information relating to financing developments, specifically developments during the first year of operating. If you are a developer, I would be very interested to hear of your tried/tested financial strategy for getting started and then expanding.

    My current situation is as follows: I work in full time employment and intend to continue working full time for the first few projects. I have 55K equity in my home and would be willing to use this for my first project, and plan to complete approx. 4 projects in the first year.

    Using my first development as an example, should I use some of the 55K equity as security to obtain a second mortgage, and then wait until I have sold the property before repaying the mortgage and starting on a second project? This strategy would mean I would be having to rely on the sale of one property to purchase the next one and so forth, but I cannot see another way around this until I have enough profits to start financing developements without the need for mortgages.

    Or perhaps the best method is to create a company and get a business loan from a bank, thus allowing me access to funds as a when I need them?

    Please feel free to send me links to useful articles and books on this subject.

    Thanks in advance,

  • #2

    Just having equity is not really enough, you will need cold hard cash.

    Given the current state of the mortgage market nothing can be guaranteed, a standard mortgage of 90% means you will need 10% deposit (assuming the property is £150K thats £15K), then you will need refurbibishment funds, at the very least £10K assuming that a lot of work is not required (new kitchen /bathroom and decor for example).

    Then you have to sell the house, estate agents fees, legal costs, HIPS if required, and mortgage payments whilst waiting for it to sell.

    I suspect that you will have to be extremely lucky to turn round 4 a year (buying process, refurb work and selling in less than 3 months????)

    And at the same time doing a full time job!!!


    • #3
      Thanks for replying, Bill. In reply to your comments, I do have hard cash - 55K in equity and a monthly income which would cover 2 mortgages at the one time for the duration of the project. Furthermore, I wouldn't be looking to take on a 200K project on my first outing either (that would be crazy); it would be a smaller project and gaining valuable experience is what I would be after from the exercise, not 20% profit. Profit would come later once I have more experience and can take better informed risks.

      To all: Just to reiterate the reason for my post - I am looking for comments from other developers about how they managed to expand from having modest funds to running multiple projects at the one time.


      • #4


        For clarity, although I am not a developer, I do have 25 years experience in project management, business management, charity management, the construction industry, as a management consultant and I currently run a construction company which works for investors in the buy-to-let market, my current project is a £38K refurbishment.

        Equity is not hard cash, it is simply the value of the property you own less the amount you owe on your mortgage, yes you can release some of the equity, but the my reply was simply stating a financial fact.

        If you are not planning a £200K project then I must assume that your not in the South of the country.

        I wish you luck in your venture


        • #5
          Another big problem is that mortgage lenders are really cutting down on their own risks, plus the housing market is in a downturn, so really you need to look at the local market conditions where you are planning to develop, and use a business plan to determine your profits under different conditions, and absolutely justify the timing of the development.