Three Non-Negotiable Checks Before Committing Capital 📝

Committing capital to a property development project is a major decision. While high returns are the reward, successful investing is fundamentally about minimising risk. 

At Brentor, our rigorous due diligence process ensures every project is scrutinised against crucial criteria long before we make any big decisions. 

For any investor looking to sign off on a deal, neglecting these three high-level checks is simply not an option.

Knowing Your Way Out

Before you even acquire a property, you must have a crystal-clear understanding of how your capital will be returned. Your chosen exit strategy dictates your financing structure, timeline, and ultimately, your profit margin.

Refinance or Sale? 

Are you holding the asset for long-term rental cash flow (Refinance) or selling immediately for a large capital gain (Sale)? Your valuation method, target GDV (Gross Development Value), and speed of completion depend entirely on this choice.

Contingencies

What is the "Plan B"? If the sales market softens, can the property be immediately converted into a high-yielding rental asset (like an HMO or professional rental unit) to generate cash flow until the market recovers? A resilient strategy always has a viable alternative exit.

A well-defined exit strategy, vetted against current market conditions, provides a solid framework for the entire project.

Accounting for the Unexpected

In development, the budget you start with is rarely the budget you finish with. The greatest threat to profit is often a combination of cost inflation and unexpected delays. This makes a robust contingency budget non-negotiable.

Realistic Budgeting

Your contingency fund should be a minimum of 10% of the total build cost for experienced developers, and potentially higher for complex conversions or projects facing known risks.

The Inflation Factor

You must budget not just for current material costs, but for the potential increase in those costs over the entire 12 to 18-month build period. Similarly, account for potential interest rate rises if your debt is variable.

Time Delays = Cost

Every week a project is delayed incurs holding costs. Your contingency must cover these financial losses, safeguarding your projected ROI.

At Brentor, we factor in conservative cost estimations and dedicated contingency funds, ensuring our projects have the financial resilience to withstand market volatility.

Planning Approval Rigour: Checking the Fine Print

Planning approval is often viewed as "game over," but the detail within the approval conditions can introduce significant risk. Investors must rigorously vet the final planning documents.

Restrictive Conditions

Are there any onerous conditions attached to the approval that impact profitability? This might include requirements for expensive materials, unexpected contributions, or overly strict timing limitations that don't align with your project timeline.

Prior Approval (PDR) Checks

For C2R or expansion projects, ensure the Prior Approval approval is legally sound and covers the full scope of your intended works. A flaw here can lead to enforcement issues and project collapse.

Brentor's process involves extensive review by our planning and legal teams to ensure all approvals are sound, compliant, and won't introduce unnecessary financial burdens, turning potential planning hurdles into predictable processes.

Partnering with Brentor

By making these three checks non-negotiable, you practice disciplined investing. When you partner with Brentor through our Joint Venture model, you benefit from a system where these rigorous checks are already built into our Standard Operating Procedures (SOPs), minimising risk and ensuring your capital commitment is a calculated step toward maximum return.

To find out more, contact us to book a call with one of our investment specialists.