Research & Acquisition: The first step is identifying a property or land with development potential. After securing planning permission, the developer purchases the property, often with the help of bridging finance or an initial tranche of development finance. This initial phase sets the foundation for the project.

Development Planning: Next, the developer works with architects, planners, and contractors to create a detailed plan and budget. This stage involves estimating costs, timelines, and the potential value of the finished project (GDV – Gross Development Value). A key part of this phase is outlining an exit strategy—how the loan will be repaid—whether through the sale of the completed development or refinancing into a long-term mortgage.

Funding & Construction: Property development loans are typically released in tranches, meaning the total loan is broken into instalments. Lenders usually require the developer to fund the initial stage—known as hurt money—demonstrating their commitment to the project. This first tranche often covers the land purchase or initial construction costs.

Once the first stage is completed and signed off by a surveyor or project manager, the lender will release further tranches as the project progresses. Most property development loans are broken into 3-5 tranches, though this can vary depending on the size and complexity of the development. These staged payments help ensure that the project remains on track, with the lender only releasing funds once each milestone is completed, reducing risk and improving cash flow management.

Completion & Exit: Once the project is finished, the developer moves on to the exit. If the plan is to sell, the property is marketed and sold, with the development finance repaid from the proceeds. Alternatively, the developer might refinance with a long-term mortgage and rent out the property for ongoing income. Regardless of the strategy, the exit is crucial as it is the point at which the development loan must be repaid in full.

Possible Exits:

• Sale of Property: Selling the completed development to a buyer, usually the most straightforward and common exit strategy.

• Refinance: Securing a long-term mortgage on the finished property and using rental income to repay the development finance.

• Partnership Exit: Selling a stake in the property or entering into a joint venture with another investor, allowing the developer to either reduce debt or reinvest in future projects.