Loan Calculator – Development Finance
If you are looking for a loan calculator for your next development project then we can help.
Tip number one, always work backwards from the gross development value, or GDV, when calculating a purchase price. It’s the very best way to work out what you should be paying for a property or a building plot.
Be realistic about the gross development value
In fact, we suggest being a little bit pessimistic when calculating this figure. Use our development finance calculator to work out your costs.
Next, just because a property needs refurbishing, that doesn’t automatically make it a good deal. If you spot a property that appears to be, say, 20,000 pounds below market value, if you’ve then got to spend, say, 30,000 pounds doing it up, that’s not a deal.
Unless you can add some real tangible value in some other way, for example, say, building in the back garden, I would suggest you should be looking for another project.
Just because a plot has planning, that doesn’t guarantee you a profit or that the property could even be developed at all, for that matter. Obviously, you need to do your research careful and dare I say if the agent is offering up some fairly persuasive numbers, for example the gross development value, keep in mind the agent makes a commission if you buy. Personally, I would suggest putting more faith in your own numbers, rather than theirs.
Always have a schedule of works.
If you don’t know what you want, how does the builder, and just as importantly how can you possibly have a realistic budget? You can’t build from planning drawings. It’s therefore impossible for builders to accurately price from them. Your architect needs to produce building reg drawings before you go and get any prices.
Remember that all of your finance will be issued to you in drawdowns, otherwise known as staged payments.
Don’t be afraid to outsource to experts.
Honestly, they will save you thousands in the long term. You don’t have to appoint the cheapest builder, work with the best builder. On any one project, you can only achieve two of the following three items. You can get high quality, fast turnaround, or low cost. Our advice is to aim for high quality and fast turnaround, if you possibly can.
Delaying the project whilst trying to beat down the price can cost you more in the longer term than what you’re trying to save. Delays tend to swallow up your profits as the financing costs on any given project are genuinely quite high. Always agree terms with your builder before the work starts and write them down for both parties to keep a record of.
On larger projects, don’t be afraid to use a formal contract.
Lastly, I’ve got to ask you this question.
Is project managing the works really the best use of your time and skills or might your time be better spent going out looking for that next deal?
Our development finance calculator is available to all property developers. All you have to do is send us your next deal and we will work out the costs and profit for you.