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Developing a Subdivision December 25, 2017

Subdividers are unique people in any community. To the average homeowner the subdivider appears to be fearless and almost insane, because of the enormous financial risks that appear to be around every corner. The average homeowner who can barely comprehend their own mortgage finds the idea of developing a subdivision with finance that is 20 or more times larger than what they got for the home seems simply terrifying.

Cheryl Thompson, NZ Mortgage Broker

The developer of course does not find the process terrifying but instead relishes the challenge of making a decent profit out of the deal, and they rely on their own innate negotiating ability to make sure that they get the entire job done as profitably as possible.

The developer needs to have an experience team around them, including Urban planners and architects, a very good accountant, a very good solicitor and most importantly they need a very good mortgage broker, because a development cannot even start without finance. The developers mortgage broker will almost certainly be a long-term team member, as a developer needs to trust the mortgage broker implicitly that they will get the best financial deal for them and manage the process competently.

The financing for development is far more complex then that for purchasing a residential property, especially if the developer wants to finance the majority of the project through mortgages and loans. The reason for the complexity is because the project takes place in stages and each stage has its own particular financial requirement. If you’re interested in Timaru mortgage brokers click here for more information. For example the developer may have needed finance to purchase the original land and then to hold the land for as long as it takes to get council consent to develop it. This could easily be a 3 to 5 year process. The financing will need to cover the cost of the land purchase, the annual rates, and any planning an architectural design work that’s required.

The developer may not actually begin to sell any properties until well into the project, unless the development has been very cleverly marketed, and any finance the developer gets has to carry them through until they start making sales. A developer may be selling a land package only, or they may tie up with a builder and sell a house and land package, which may be more profitable for him in the long run. The developer and builder may not want to have more than a handful of houses built on the development before they actually start selling, as this would require a lot of financing and really scary debt servicing.

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