Lets say you purchase some land with planning permission for £500,000, and to keep things clean we will just accept that you had that cash available at the outset in order to buy it.

( some lenders and landowners will agree to a deferred purchase whereby you purchase the site in stages as the site progresses,  please contact use about that as it gets too complex to outline here and of course requires careful negotiation and contracts in place to facilitate it).

So you have bought the site for £500k  and have plans to build 10 houses worth £250k  each on the site. That gives you a final Gross development value of  £2.5million.  (  GDV  £2.5m)  

Lets say your build costs are £150,000  per property  so you need 10 x £150k ,  but you dont need it all at once on day 1.

Lenders will advance upto 65%  of the GDV  ie  £2.5m  x 65%  = £1,625,000   towards the build costs.

so a typical development loan example layout might be

• Site value day 1 = £500k  for 10 plots ( equals £50k per plot)
• Lender will lend 65% of that =  £325,000
• That should be enough  to build at least 1  if not 2 of the 10 houses
• Stage 2 =  2 x houses completed valued at £250k each = £500k for the houses plus 8 plots remaining at 8 * £50k = £400k  = site now worth = £900k
• Site value £900k x 65%  = £585k  minus £325k already leant = new net loan available of £325….. which allows you to build the next 2 x houses 

and so it goes on, until all the houses have been built out.

Note during the property construction, you would also no doubt be selling some properties and therefore may not always need to go back to the lender for more funds, as you would be able to recycle the profits back into building the future houses.