Being a housing developer has always been a risky business, there are many areas where a mistake can cost you thousands of pounds or even jeopardise the entire project.
A few examples:
· Site selection
· Overestimating an areas ceiling price
· Optimistic build costings
· The wrong construction team
· Targeting an incorrect demographic
Ultimately a good developer will do everything they can to mitigate these practical risks but it’s amazing how few take the same due diligence with their broker relationships.
What exactly do I mean by this? Rather than a targeted assassination of my peers, I hope to offer a few pertinent points housing developers need to consider when choosing a broker to work with:
How are you as a developer treated? Do you have a central point of contact that you know will always pick up the phone or call you back? Once the deal is done has your broker lost interest, are you simply left to their administrator or are they still there front and centre?
One thing I pride myself on is full involvement throughout the entire process, from getting out to client’s sites, sitting in lender meetings, to the excitement of seeing the finished project.
The real question would be is your broker interested? Is there a genuine buzz about your project or is this a transactional relationship? Working with someone who shares your vision and ethos helps you achieve a common goal and ensures a smoother deal.
It’s also worth considering what other services your chosen partner can offer – we are a fully regulated firm, this means we can put together a full customer journey which encompasses the land purchase right through to your buyers’ financial needs. To give an example I worked with a first time developer in Clacton-On-Sea:
- I helped him acquire land with no planning with bridging finance.
- Once planning was obtained, we used development finance to cover 100% of the build costs.
- I then lowered the interest rate of the completed build, giving my client more time to sell his chosen units with less financial pressure.
- We refinanced two of the units on term deals to add to his portfolio.
- We then pre-qualified ALL of their potential buyers, ensuring they could proceed.
- I arranged mortgages and protection for their buyers, paying an introducer fee back to our client.
- The client was provided updates on the status of their mortgage applications – a service perfected through our array of relationships with national house builders.
- Our protection team insured the site and arranged business protection for his trading business.
We offer a full ‘cradle to the grave’ service, completely wrapping up all development transactions and offering unparalleled ease for our clients.
One 77 do not charge fees for advice, take this as you will – I’d be a hypocrite to attack fee charging brokerages, myself coming from that background. The question I would pose is how much value is that fee buying you? Is the 1% being added by a broker to your loan being earned in service levels and results? My guess would be that it’s not the case and I’ll challenge you to test me on it.
Does you broker have the contacts and knowledge to get you the best available deal?
Interest rate is only half the battle, a good broker will be tailoring a solution that truly fits both the individual developer’s mentality, the lenders appetite and the nature of the build itself. This is not a one size fits all industry and each project is unique and requires care and attention.
The true test is in the delivery, getting a recommendation wrong means money wasted on valuations and other professional services, so confidence in the end result is paramount.
One 77 do not earn if we do not deliver, I would hope this demonstrates a concrete belief in our business model and way of working.
The direct route?
Some property developers choose to go it alone and approach lenders themselves. When there are fee free services like ourselves I find this incredible, why would you want to create more work for yourself when we will always:
- Source you a better deal
- Have access to products you will not
- Decrease your workload and stress levels.
- Save you money
In an ever changing market I don’t believe any housing developer has the time to monitor the minutiae of the day to day shifts in the development finance world.
Head Of Specialist Lending