Property development – How it works

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Property development – How it works

How to become a property developer

Property development means buying a property, developing it through renovation, then either selling it on for a profit or renting it out to tenants.

One of the most appealing things about property development is that anyone can do it. You do not need any qualifications or training to get started.

Property development can be extremely profitable but often requires large amounts of capital for purchases and works.

Unless you have money saved to cover all your costs, you’ll need to borrow to pay for it.

We specialise in bridge finance, second charge, commercial and development finance.

Below we discuss whats involved, how it works, rates, example borrow rates and fee’s as well as some FAQ’s

Rates from 0.48%

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Development rates

0.48% per month
  • Up to 85% Loan to value for the refurbishments
  • Up to 100% of refurbishment costs
  • Lenders that work on the guaranteed value after works are completed
  • Light, Medium and Heavy Refurbishment projects (from internal works to conversions and extensions)
  • Staged releases
  • Buy to rent projects
  • Change of use - if changing the purpose of a building


For property you want to buy, renovate and sell 

Example fee’s

Below are some typical examples of how much you could repay on various loan amounts.

Speak to our specialist brokers about your situation by using the live chat option or calling 0800 316 2224.


Loan Amount£100,000£200,000£400,000
Interest Rate0.48%
Loan repaid month 3£103,795£206,257£411,180
Loan repaid month 6£105,297£209,241£417,129
Loan repaid month 9£106,821£212,269£423,165
Loan repaid month 12£108,366£215,340£429,287
Total gross loan (with interest and fees)£108,366£215,340£429,287

Bridging loans:

This a loan you can use to buy a new property that you need to renovate before re-selling or renting on the market. You can use bridging to release equity you have in an existing property for up to 24 months.

Development finance:

This is finance to extend or make structural changes to an existing property, maybe converting a house into flats, or maybe you are looking to build from the ground up on land with planning permission.

Commercial mortgages:

You’ll need a commercial mortgage if you’re going to use the property for business purposes, e.g. as a shop.

Second charge buy to let mortgages:

For if you own a buy to let property and would like to release some equity to start a new project.

Second charge mortgages:

This is a loan that allows you to release equity from your main residence, often ideal if you are asset rich and need funds towards a development project.

What does property development involve?

Property development means buying a property, developing it through renovation, then either selling it on for a profit or renting it out to tenants.

This can often involve buying a property that is cheap because it needs to be updated and renovated through new furnishings, repairs and maintenance.

Buying a property cheaply means that once you have injected new life into it, you should hopefully be able to sell it on for much more than you originally paid.

Why be a property developer?

One of the most appealing things about property development is that anyone can do it. You do not need any qualifications or training to get started. Anyone can become a property developer simply by buying a house then selling it on for a profit.

Plus, if you get it right the financial rewards can be substantial, particularly when you start to build a portfolio of renovated property that has been sold on or rented out.

Research properties before you buy

To give yourself the best chance of success at property development, you would have to know the market inside-out:

  • Find out how much other properties go for in the area
  • Decide on who your target buyer or tenant might be
  • Find out about stamp duty

Buying a repossessed property or from an auction and renovating it could be your cheapest option. Bridging or development loans can help you in these situations. Or approach property owners directly. This works well if someone has a large estate with disused buildings that could be transformed. They might not have the money to do the work, so you could get the buildings at a cut price.

Buy at the right price

Once you know the market, you should be able to estimate what most properties in the area are worth, what the rent would be on them, and whether you can add value. A good tip is to never buy the most expensive house on the street as you’ll struggle to add value.

Knowing when the right time is to buy and sell can also add thousands to your bottom line. And there’s no need to rush into it. It might be that you’ve found the right property but don’t have the finance in place, or you were ready to sell and buy the next one but the chain collapsed. Using a bridging loan in these circumstances can give you the breathing room and flexibility you need.

Add value

Value is key. This means finding the right property to develop. Look for things like un-used loft spaces that could be bedrooms, large gardens that have space for extensions, empty outbuildings, or whether the building could be split into flats.

Then make sure you get the right people to do the right job. There are many things you can do yourself but for electrical, plumbing and gas installations, having a certified professional is key.

And with many property developments, time is of the issue; get professionals to do a good job fast. Ask around for recommendations for reliable builders and it’s often worth running your bigger project ideas past a professional before you go ahead with the purchase.

What else should you consider?

Property development involves a significant amount of research and capital before you can get started, and will require a huge investment of both time and money.

If you decide it is for you, start off small with your first property, and only move on to bigger projects as you gain experience and confidence, property development lenders look favourably on those who have gradually gained experience on smaller projects.

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Will I qualify for a bridging loan?

The loan amount is based on the loan to value ratio (LTV) from properties current or estimated future value, if renovating.  Most bridge lenders will lend up to 75% of the value, but there are some that will stretch this to 85% if the purpose is to renovate and sell the property for profit, after the costs of works.

Key factors considered by lenders are the:

  • Subject property
  • Loan-to-value
  • Project plans
  • Exit plan (how you will repay the loan, such as traditional mortgage, sale or other capital)

What are the charges on a bridging loan?

The usual fees are a valuation fee, legal fees and a lender application or arrangement fee to cover the costs of setting up the loan.  There can also be fees if you need to extend the term of the bridge.  Its therefore very important that you fully plan your project to avoid unnecessary fees.  If you decide to proceed with a bridging loan through Clever Lending we will also charge a fee (as discussed on application) and can help you to ensure you have the correct finance in place for the correct time period.

What interest is payable?

Bridging loan interest rates are set by considering the property value, size of loan, loan to value (LTV), use of property, condition and location and are usually chargeable on a month basis, instead of the traditional mortgage annual rate.

Due to the slight increase in risk with bridging and the short-term nature, lenders charge slightly higher rates compared to a traditional mortgage.

How can I repay a bridging loan?

With bridging loans, interest and payments can be retained, rolled up or serviced, the difference being retained and rolled up, means you make no payments each month and instead they are deducted from the original loan balance.

With serviced, you make the interest payments each month and therefore the remaining balance on exit is the original amount borrowed.

The beauty of a bridge is you can have no monthly payments, using those funds as cash flow during the project and reap the benefits with a quicker sale or say, rental income.

At the end of the bridge finance term, you will need to repay the capital, any added interest and fees in full.

About Clever Lending

We will do everything we can to provide you with the most suitable products for your individual circumstances. We provide:

  • Expert product knowledge on the latest products with some of the lowest rates on the market
  • A flexible service working either with you on a case or dealing with customers directly – whichever you prefer
  • Competitive commission rates
  • A fully compliant service with clear audit trails helping you with any regulatory obligations

6 Great Reasons to Choose Clever Lending for a bridging loan

In-house regulated bridging advice
We have a dedicated team of qualified specialists who are ready to discuss your regulated bridging advice enquiries

Market-leading rates
Competitive rates on bridging loans with 100% LTV available with added security

Hundreds of products
First, second and third charge bridging loans available from £25,000 with terms from 1 month to 24 months

Staged release on development
Borrowers can secure renovation funds for various stages of their property renovations 

No exit or legal fees
We can offer bridging loans with no exit fees for flexibility of the investment plan

Manage all enquiries online
Manage all bridging enquiries at any time from any device using Clever+

Contact the Clever Lending team on

0800 316 2224

This page is for consumer use only. All other pages on the website and links to those pages are intended for business use only.