Property development tips: a practical guide for developers
The best property development tip is short: make your profit when you buy, not when you sell. A deal that only works if the market rises, the build comes in on budget, and every unit sells on day one is a deal that has no margin for the things that always go wrong. The developers who last are the ones who stress-test the numbers before they commit, build a team that covers their gaps, and line up an exit before they draw down a penny.
This guide pulls together the tips that matter most across a scheme, from sourcing and appraisal through planning, build cost, finance and exit. Some apply to a first refurbishment. Others matter more once you are running several projects at once. All of them come from the same principle. Control the variables you can, and price in the ones you cannot.
Get the appraisal right before anything else
Your appraisal is the deal. Everything downstream, including the finance, hangs off it. The four numbers that decide whether a scheme stacks are the purchase price, the build cost, the Gross Development Value (what the finished scheme is worth), and the profit left after the cost of finance.
Build a contingency into the cost line from the start. A common rule of thumb is 10% to 15% on the construction budget, more on a conversion or a listed building where you cannot see what you are buying until you open up the walls. If the margin is already thin before you start, it disappears the moment a price rises or a programme slips. Test the appraisal twice: once on your expected figures, and once on a worse case where the GDV softens and the build overruns. A deal that survives the worse case is a deal worth doing.
Treat planning as the biggest variable
Planning is where the largest risk usually sits. A refusal, or a long delay, changes the entire appraisal because your finance keeps running while you wait. Where you can, buy a site with consent already in place, or structure the purchase so you only complete once planning lands.
If you are buying unconsented land to progress through planning yourself, price the time and the uncertainty into the deal. Land without planning is typically funded at a lower loan-to-value, indicatively around 50% to 55% of site value, against up to 60% with consent. The gap reflects exactly the risk you are taking on. Speak to a planning consultant before you exchange, not after.
Build the team that covers your gaps
Lenders rarely fund a developer in isolation. They fund a scheme, a team and an exit together. On anything beyond a simple refurbishment, expect to need a main contractor, a quantity surveyor to control cost, and an architect. The strength of that team is what carries the experience you may not yet have.
This matters most for first-time developers. A first-timer with a credible contractor, a quantity surveyor and a clear exit is far more fundable than someone going it alone. Choose people who have delivered your type of scheme before, check their references properly, and agree the contract terms in writing before work starts.
Understand how the finance actually works
Development is rarely funded from cash alone. Most developers borrow against the project, put in a share of equity, and repay the loan when the scheme exits. Development finance is the main product. It funds ground-up builds, conversions and heavy refurbishments, released in stages against the works rather than as one lump sum.
Indicative interest runs from 6.5% to 9.5% per year on mainstream residential schemes, with higher-risk or first-time deals priced above that. Lenders typically advance up to 80% of total project cost (Loan-to-Cost) and up to 70% to 75% of the finished value (Loan-to-GDV) on standard senior debt. Where your equity cannot fill the gap, a second layer can. Mezzanine finance sits behind the senior lender and prices higher, indicatively 12% to 20% per year, to reflect the extra risk. Some lenders instead offer stretched senior debt, a single facility pushed to around 80% Loan-to-GDV at 8% to 12% per year. Every figure is indicative until a lender confirms it on application.
Know the difference between LTC, LTGDV and your equity
These three figures control how much cash you need in the deal, so it pays to be precise about them. Loan-to-Cost measures the loan against your total project cost. Loan-to-GDV measures it against the finished value. The lower of the two usually caps your borrowing, and the difference between that cap and your total cost is the equity you must find.
Worked example
On a scheme costing £1m to deliver, with a £1.4m GDV, an 80% LTC facility lends £800,000, leaving £200,000 of equity to find. A 70% LTGDV cap on the same scheme lends £980,000, so in this case the LTC limit bites first.
Run both calculations on every deal before you assume the headroom is there.
Get the exit nailed down first
The exit is the part developers most often underestimate, and the part lenders scrutinise hardest. Without a credible exit, no lender will fund the scheme in the first place. There are two common routes: sell the finished units, or refinance onto a longer-term mortgage and hold them.
If your exit is a sale, be realistic about how long units take to sell and build that window into the term. A typical development facility runs the build period plus a 6 to 12 month exit window, so 18 to 30 months in total. If your exit is a refinance, check now that the finished scheme will meet a term lender’s criteria, rather than discovering on completion that it will not. Many developers carry a development exit facility, a short-term bridge that repays the development loan once units are built but before they all sell, to take the time pressure off.
Avoid the mistakes that sink first schemes
A few errors come up again and again. Underestimating the build cost is the most common, which is why the contingency line matters. Choosing the cheapest lender rather than the right one is another. A decline that lands on your file after a wrong lender choice makes the next application harder and costs you weeks. Forgetting the cost of finance in the appraisal is a third. On a typical 18-month build, the total cost of finance can run 8% to 15% of GDV once you add interest, arrangement and exit fees, so it has to sit in the numbers from day one.
Start at a scale that matches your experience. A successful small scheme earns you better terms and a track record for the next one. Stretching too far on a first project is how developers turn a thin margin into a loss.
How a broker fits into your scheme
Vortex Finance is a whole-of-market property finance broker. We do not lend our own money. We sit on your side of the table, shop a panel of 100+ lenders, and arrange the finance structure that fits your scheme.
Different lenders have very different appetites for development risk. One will not touch a first-time developer; another specialises in them. One caps at 65% Loan-to-GDV; another will stretch with mezzanine on top. Matching your deal to the right lender first time matters, because a re-shopped case costs you months. We package the appraisal, the cost plan and your track record so the underwriter sees a clean file, and we push the valuer, monitoring surveyor and solicitors to hold the timetable. You can read more about how the funding is structured on our development finance hub.
Frequently asked questions
What is the most important property development tip?
Make your profit when you buy. Stress-test the appraisal on a worse case before you commit, with a softer GDV and a higher build cost, and only proceed if the deal still clears a sensible margin. A scheme that only works on best-case figures has no room for the overruns that nearly always happen.
How much money do I need to start property development?
Enough equity to cover the gap between your borrowing and the total cost, which is usually 20% to 30% of project cost on standard senior debt. Lenders advance up to 80% Loan-to-Cost and 70% to 75% Loan-to-GDV, so the rest comes from you, a joint-venture partner, or a mezzanine layer. Figures are indicative until a lender confirms.
What are the most common property development mistakes?
Underestimating the build cost, forgetting the cost of finance in the appraisal, choosing the cheapest lender instead of the right one, and starting at too large a scale on a first scheme. Each one erodes a margin that was probably tighter than it looked on the spreadsheet.
Can a beginner get into property development?
Yes, though it is harder and priced a notch higher. Lenders want more equity in, a lower Loan-to-GDV, and a strong professional team to offset the lack of a track record. Many first-timers start with a refurbishment before moving to a ground-up build, or bring in a joint-venture equity partner.
Do I need an exit strategy before I start a development?
Yes. Every lender will ask for one, and a strong scheme with a weak exit story is still a decline. The two common exits are selling the finished units or refinancing onto a term mortgage. Confirm the exit is realistic before you draw down, not on completion day.
This guide is information, not regulated advice. A qualified broker will confirm what applies to your specific case on the call.
On most deals we earn a procuration fee from the lender on completion. Our fee model is confirmed upfront before any application, and every fee is disclosed in writing before you commit.
Talk through your scheme with a broker
If you have a site in mind, book a short call and we’ll give you a straight read on whether it stacks, covering purchase price, build cost, GDV, track record and exit, then come back with indicative terms and a structure that fits. No fee to find out, and no commitment until you tell us to submit.
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