Property Development Lending: 5 Things Lenders Check Before an Offer


Daniel Norman - CEO and co-founder of Aprao - has over a decade's experience in property development financing. Today he shares what lenders are looking for in an appraisal to help you secure development finance, faster.

Throughout my 10 years in development finance, I witnessed the same problems repeat themselves time and time again with developers looking to secure finance - mainly lack of accuracy from spreadsheet-based appraisals, inconsistent formats, and either too much or too little information.


It was this desire for a more efficient process which led me to set up Aprao. Our platform makes it easy to create and send development appraisals that hit all the right notes for lenders, because that's precisely what I had in mind when we started building it.


1. Clarity

Lenders receive a lot of appraisals to review, and even the best opportunity can be lost when you're not making yourself clear from the very beginning.


2. Simplicity

While lenders understand your desire - and need - to include detail in making your calculations, property developers will often provide far more detail than is necessary for a lender to make a decision. More detail does not necessarily mean you've presented a more valuable opportunity. Keep it fairly high-level initially, and if your lender has questions, they will ask you for more detail.


3. Transparency

As I've already mentioned, lenders receive a lot of appraisals. They know what to look for, and we know when someone is being... shall we say, unrealistically optimistic! Be honest and straightforward. You can never underestimate the value of building trust with lenders.


4. Be Realistic

Being realistic is essential. Put the work in to check your numbers are realistic before presenting an opportunity to a lender. Part of the lender's due-diligence process is to check your sales/rental values and build cost estimates by instructing professional reports, so any unrealistic numbers will come out in the end.


5. Profitability

At the end of the day, a lender's responsibility to their investors is to make wise investment decisions that will ultimately be profitable. The general rule of thumb is to look for a minimum of 25% return on cost pre-finance which will usually equate to a 20% return on cost after the cost of finance - a minimum benchmark for many lenders.


Since we started Aprao, lenders and property developers alike have shown great confidence in our platform. They continue to inform our product development choices going forward, so our customers can feel confident that lenders will get the best view possible when they receive an Aprao appraisal.

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