Buying development land can be a lucrative investment, whether your development plans are residential or on a large commercial scale. But this can also be an expensive commitment, and if done wrong, can be extremely detrimental to your finances in the long run. Here are four key points to consider when buying land for development.
Location covers far more than the simple fact of whether your plot is in a desirable location. It’s certainly important to invest in areas that are either popular or up and coming, but there are other factors to consider when you’re buying land for development. What problems can the site itself pose to your construction? Flood plains are a particular concern, as are developments on land that may have protected trees or wildlife.
What is access to the site like? If access relies on a right of way, this will affect what you can do with the land. If it’s a development of more than a few plots, you’ll need to consider roads, drainage, and sewers.
What has the land been used for historically? A site may seem like it has fantastic potential and is great value for money—but it’s important to carefully consider why this might be. The site may have been contaminated in the past, for example, and many lenders won’t lend on it as a result.
What exactly is it going to be used for? Some cases are simpler than others; knocking down an old property to develop a new residential build, for example. But others may be more complicated; lenders will generally try not to lend to developments which will be used for activities such as gambling, for example, to avoid reputational damage. Development lenders will need to know the exact nature of your planned development.
How will you achieve it?
You don’t need to wait until you’ve found your land to start considering the finance. How are you going to finance the purchase of the land? You may find that you need to move quickly once you locate the perfect spot, in which case you might need short-term bridging finance to complete the purchase. You can also get a specialist development loan, but you may need a broker with a previous relationship with developer lenders to achieve this.
There’s plenty to consider even within this brief overview, which highlights the complications of buying land for development. If you’re either considering or in the process of a purchase, we can assist you. Our expert development finance brokers are on hand to guide you every step of the way.