Finances

Property development refinancing can overcome common problems

on


This guide outlines how you can use refinancing to solve many of the problems occurring in current property development projects.

It isn’t uncommon for property development to encounter unanticipated problems while undertaking key projects. The emergence of these unforeseen issues can occur in every project, including well planned and managed ones. You can face these problems because countless factors can go wrong with your property development efforts.

Current problems in property development

Nowadays, many construction delays are caused by the combined effects of COVID-19 and other roll-on impacts on the supply chain. However, your project can also stall due to an essential supplier simply not delivering as expected.

One of the main reasons for this crisis is also, paradoxically, the recovery of the economy and consumption. The European area returned to growth in the second half of 2021, largely thanks to increased household consumption. The consulting firm Deloitte notes that this growth is the result of two factors: the sharp increase in demand for products and services inaccessible due to pandemic-related restrictions, as well as the sharp increase in household savings.

This trend is also reflected in the United States. McKinsey said that consumer spending in the fourth quarter of 2021 will increase by 7% compared to 2020, mainly thanks to high-income people and young consumers.

The gradual restoration of consumer confidence is having a rebound effect: the increase in demand for products and services, especially in the sectors hardest hit by the pandemic, such as property development.

The COVID-19 pandemic has also accentuated the problem of shortage of truck drivers. A study conducted by the logistics consulting firm Transport Intelligence confirms a shortage of 400,000 truck drivers throughout Europe, including Poland, the United Kingdom and Germany.

According to the report, the United Kingdom is in a particularly difficult position: it is facing not only Brexit, but also the departure of many European workers, who left the country during the pandemic at a time when fears of border closures were intensifying.

The crisis in raw materials (such as wood) is impacting companies in various sectors. The sharp rebound in global demand has led to an increase in the price of raw materials, as well as supply problems that affect companies dependent on importing these materials into their production processes.

To this scenario is added the significant dependence of the world economy on China. The world’s second largest economy is shrinking. Data published by the National Bureau of Statistics of China (BNS) indicate that between July and September 2021, the Asian giant grew by 4.9%, far from the 7.9% recorded in the second quarter of the year. This data could have an effect on the global supply chain, especially for companies that source from China and are already suffering the consequences of the crisis.

Additionally, stormy weather can halt your project’s progress, or your preferred construction crew can be overbooked when you need them for the job.

Property development refinancing tactics

Sadly, these delays can lead to huge penalties if you borrow development finance for your project. However, you can avoid fines by taking out development exit finance. Below are some tips worth following to refinance your development projects effectively.

Keep Costs Low

Consumer loans normally have higher interest rates than other property development finance types. Therefore, you can save enough money on your borrowing cost if you are working on a construction project. In addition, you can dedicate all your resources to completing the project since the interest that builds up on your loan exit is kept. 

The Right Time For Property Development Refinancing

You have many alternatives to consider as a property developer when you choose to refinance. Therefore, it is prudent to take your time to study the options you can explore before deciding whether refinancing your development project is the best course of action to take.

Generally, look at your current project’s terms and conditions and whether you will incur extra costs if you refinance, even if you can suffer a net loss by doing so. Additionally, consider whether you can make your full payments on schedule and the possibility of adjustments.

A general rule you can follow is considering refinancing an option if you have been working on a project for nine months. After this long, you should undoubtedly be certain that you can meet your construction deadlines without any setbacks since most of the tasks would have been completed. If you are uncertain about whether this will happen, you can go in for debt consolidation options like most developers do.

Prolong Your Terms

You will likely be given a loan term of just 12 months since it is the case in many situations. This short term can lead to timetable hindrances, especially if you experience problems during building or closing.

Consequently, it is vital to have a property refinancing commitment through an expert finance broker like Finbri or by yourself. Furthermore, choose a company that does not charge fees for finishing your project ahead of time.

Conclusion

You can avoid hefty penalties for delayed projects if you choose to refinance. Refinancing may also come in handy if you are a property developer looking to start your next project since it can provide essential funding. Developers seeking more low-cost strategies to fund their operation typically use refinancing to acquire a site and begin designing and planning while still taking on a project. Refinancing can make moving on to your next project truly very simple.

About Business Woman Media

Our women don’t want to settle for anything but the best. They understand that success is a journey involving personal growth, savvy optimism and the tenacity to be the best. We believe in pragmatism, having fun, hard-work and sharing inspiration. LinkedIn

Recommended for you