How to Raise Money for Property Development

Written by contributing writer
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One of the most sound investments--and one that many investors first think of when they want to put money into something--is real estate. The reason for this is that people are constantly in need of a house to live in or, if you're going commercial, a place to put their business. So, it's understood that real estate investment is great. The one difficult part is financing it.

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    Contact a mortgage company that specialises in providing money to investors and developers. Often, these companies can provide the entire amount of money needed for the development as long as you are the owner of the land. These niche mortgage companies differ from a bank in that a bank sees a developer as a risk and therefore doesn't typically lend to them. They see someone who is going to live in the house as more stable. However, because you are borrowing from a niche lender, they make up for the risk by increasing the interest.

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    Contact friends and family and include them in the deal. You will continue as the developer, but if you have four or five friends, colleagues or family members that are contributing, the money comes from numerous sources. Then, when you sell the developed property, each takes a chunk and is obviously very happy. It is important, though, to keep paperwork detailing how things will happen.

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    Contact a private investor. This differs from step one in that you are not spending money on interest. Instead, you have found someone who might not have the time themselves to develop property, but has the capital to invest. You guarantee that individual their money back plus a percentage and you walk away with a nice amount of money if the sale goes well. This allows you to focus more on development and less on money.

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    Use your own money and start small. People often think that they have to buy huge houses or apartment buildings to be successful. Instead, buy a small house, fix it up and then sell it. The profits can sometimes push you in the direction of not needing help financing your projects. You'll be able to fund it yourself and further expand your real estate holdings.

Tips and warnings

  • Real estate investment works very simply. If you put money into it and make it appealing, you will usually make a profit if the market is good.
  • Starting small might not seem like an ideal way to go about it, but the less money you're wasting on interest, and the fewer people involved, the more money you are going to make in the end.
  • Real estate development is still an investment and nothing is foolproof. Make sure you do research on the area before buying a property and trying to develop it.

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