For any development appraisal, it’s key that the four pillars of development are aligned to ensure successful developments. These four elements are the key to making sure your developments can be successful – as when all these factors are aligned with each other, you’re much more likely to hit your development targets.
For those who don’t know, the four pillars of development are… Sales, Site, Build and Finance. This blog will talk you through each pillar – helping you to gain a better understanding of what they are and why they’re important.
Sales
For any property developer, ensuring consistent sales of their properties is a necessity. With property development often being a high-risk high reward process for developers, regular sales must be maintained to make sure consistent projects can be worked on in future.
With most developers putting a large amount of capital on the line for each project, earning a healthy return on investment can be make or break. Due to this, it is deemed the most important pillar for most developers.
However, sales can also be seen as the weakest individual pillar, as without the other 3 pillars, it is the most difficult pillar to achieve.
One was to reduce the risk of Sales is to try and presale the development. Also, flex the GDV, so if there is a fall in prices, you have factored this in.
Site
The site of development is another key aspect to take into consideration for a property developer. Both the physical site of the property and the area that the property is in should both be thought about before putting pen to paper on a property.
The land of a property should always be investigated before a purchase is made. A property with poor land and foundations can make development works hard to carry out and increase build costs.
As well as this, the area of a property must be considered. With certain areas having a higher market value than others or is that area in decline or growth stage, it’s important that you budget in accordance with the area you’re working in to ensure a healthy return on investment.
Build
Once construction gets underway – it’s essential that the building work is done to a good standard. Failing to do this can decrease the value of a property and potentially lead to further work needing to be carried out in future.
Due to this, it’s essential that all building works are carried out to a good standard, priced correct and in accordance with planning & regulations. This can be achieved by teaming up with a reliable and experienced building company.
Using a main contractor will also help to ensure your developments can be finished on time and minimise any mistakes from being made. It’s important to remember that sometimes you cannot carry out a full development on your own.
Finance
The final pillar of property development is finance. Just like a builder, you must equip yourself with the right lender to ensure you’re properly funded for your development project. Make sure the budget is accurate and the timescales from start to finish are realistic.
The majority of developers will not fund their developments fully using their capital as the ROI is lower. Instead, they will source a reliable lender who can provide the remaining funds that are needed for the developments. Doing this allows a developer to remain within their own personal budget for the project.
It is essential that when looking for a lender – you choose one who is reliable and secure, as the last thing you want is the funds you need not being transferred to you. You may also find that private lenders can provide you with a much more bespoke solution than traditional lenders (such as banks), although the cost of finance is commonly higher.
Without the right financial solution, you remain at the start line!
How Can We Help?
With over 40 years of property investing experience, we understand that seizing opportunities requires swift and proactive decision-making.
Unlike the bank, we can finance your construction, conversion, or refurbishment with a flexible short or long-term loan. We can act as both a first charge principal lender or as a second charge and mezzanine lender, filling the gap your senior lender is unable to provide.
So, whatever the nature of your finance is, we can work flexibly around your needs and timescales to deliver your development project.