Property development offers the highest potential returns but carries significant risk.
Property development is the sharp end of real estate investing, offering the highest potential returns, but also carrying the most significant risk. When seeking development finance, the nature of your project dictates the type of funding you need. Broadly, projects fall into two camps: Ground-Up and Permitted Development (PD).
Ground-Up Development
This is exactly what it sounds like: starting with an empty plot of land and building from scratch. Because the lender is funding a project that doesn’t physically exist yet, the risk is high. Lenders will scrutinise your planning permission, your chosen main contractor, your build schedule, and your contingencies.
Funding is drawn down in “tranches” (stages) in arrears — meaning you complete a phase of the build, the lender’s surveyor confirms it, and then you get the money for that phase.
Permitted Development (PD)
PD rights allow developers to bypass full planning permission to convert certain types of buildings — like turning an old office block or agricultural barn into residential apartments. Because the structural shell of the building already exists, lenders view PD projects as slightly less risky than ground-up builds. They are faster to execute and less exposed to weather delays or severe ground-working issues.
Which Is Right for You?
For first-time developers, PD conversions or heavy refurbishments are often the best entry point, as lenders are much more willing to back a novice on a conversion than a multi-unit ground-up site.