Commercial developments can cost millions to purchase or build thus potentially command huge rental incomes. Despite the upside and potential revenue which projects can generate through commercial transactions, funders most prefer to help those that have flourished or have some equity in place. This makes it rather difficult for startup development companies to get the necessary seed funding.
Real Estate Funding
There are a number of options to choose from when applying for a real estate funding. Lenders can finance real estate developments in debt, equity or hybrid models giving the developer flexibility of the loan. If the funding is for a project yet to be developed, the lender would normally issue stage-payments which matches the development stages.
Development loans can include non-recourse and recourse financing. Recourse debt is the lenders’ ability to take the assets of the borrower if the debt is not paid. Non recourse is whereby the lender can come after the assets of the company but not the assets of the borrower. If funding is for a development project, the funder would need to see items such as land titles and government permission to be able to develop on the land.
There are selection of ways lenders will look to chose how to fund a development project. Some borrowers may seek funding from private entities however there are plenty of choices to choose from ranging from retail banks, investment banks, hedge funds, private equity firms etc., Some funds specialize in real estate such as REITS.
Increase ROI On Real Estate Portfolios
There are funds which specialize in taking in properties into the fund and in return offering a set interest rate per annum for the property entered into the fund. These are very specialized funds which are looking to maximize latent and/or non performing assets. The asset owner which in this example would be the real estate owner would receive further ROI on their property. Contact us if you would like to find out more.
Development Projects
Our funders are able to structure a loan which is suited to the needs of your development project. The type of project for whom we facilitate financing include but are not limited to:
- Industrial Projects – Waste Management Projects/Treatment Facilities/Waste-to-Energy/Alternative Energy/Bio-Fuel Projects
- Government Projects – Infrastructure
- Residential Projects – Housing/Student Housing /College Campus (Schooling) Projects/Hotels
- Recreation Centers – Amusement Parks/Resorts/Casinos/Other Entertainment Spaces
- Mixed-Use – Shopping Centers/Hospitals
- Commercial Properties – A group of apartments consisting of 5 units or more is considered a commercial building.
Startup Development Loan
When applying for a startup development loan, you might already have a structure on the site. Lenders might put a lien on the property to secure repayment obligations. Other funding opportunities can also include a comprehensive approach providing on and off balance sheet solutions. Just like any other real estate investment, lenders will make some considerations such as:
- the viability of funding a development project such as it’s location and existing infrastructure
- permits, agreements and local authority licenses – (use of greenfield/brownfield)
- and in some circumstances they may also ask for resumes of the project principles.
- Projects should contain long term job creation, sustainability and focus on quality of life issues for employees and surrounding neighborhoods.
In some scenarios our funders will provide an extra cushion in funding as a contingency measure as they are well aware that development projects can run over budget. Whilst most funders will fund up to what a project requires to complete the project, we do have a handful of funders who will fund over and above anticipated projected capex. Some of our funders are incredibly nimble and flexible and understand that nuances in large project finance. Quite often everything has to fit within a conventional banks rigid criteria and as such. This can imply the bank is looking for reason why they can’t finance a project. Our funders instead are looking for solutions and reasons why they can finance a development project.
Multi Family Development Loan
What qualifies as a multifamily building?
Any building consisting of four or five separate stand alone family dwellings is considered a “multi-family structure”. Development loans are available for the construction of a multi-family properties. Owners, developers or investors can also apply for finance that helps to fund “shovel ready” projects to acquisitions. Although multi family loans can be obtained pretty easily, it has been known that some lenders offer fixed rate loans with terms as long as ten years and LTV ratios at 80 percent.
Multi Family Occupant Buildings (MFO’s)
Have you considered buying a multi family occupant building or are in the process of buying one? This is when, instead of buying say 6 multi family homes, you buy a building which consists of 6 homes. By purchasing commercial property this way, you get one large mortgage instead of being limited to “x” number of units plus you can have one property manager instead of say 2 managers.
In the US, the minimum down payment on a commercial property can be upward of 20%. This can be problematic to investors some regional banks have tightened their lending criteria. With us, we have solutions to help investors who need commercial or residential real estate finance.
Once an investor has paid off the principle and able to create equity, they can make money on their assets. Our products provide an effective way for investors in real estate and help those climbing the property ladder. Investors can learn how to make money in real estate by inquiring through our website.
Bridging Loans
What is a Bridge Loan?
Bridge Finance usually implies a short term mortgage loan normally underpinned by property of some kind of collateral. It is designed to be an interim loan on a short term basis until a more long term loan has been agreed. Because of this, bridge finance can be a rather expensive way to raise capital.
A “bridge loan” is a short-term mortgage used to acquire a property quickly. Quite often, bridging loans are referred to as “private money” or “hard money loans”. Generally speaking, this financing option is used until permanent financing is found. The commercial property is resold, or it is rehabilitated and then resold.
Who needs this kind of loan?
Property investors who “fix and flip” properties are the most common customers who apply for a bridge loans. The advantage of a bridge loan is:
- It allows investor’s money to go further
- Bridge loans may have less requirements than applying for a bank loan
Private funding is an option for megaproject entrepreneurs who need a development loan. They can differ from main stream bank loans because commercial banks have follow a set of strict underwriting guidelines.
Leveraging Your Assets
We also have an option whereby those who are sitting on substantial collateral/assets and wish to yield a return now have an opportunity to do so! The premise being that the assets are ceded into a fund and the fund will pay out an annual return. Assets accepted into the fund range from properties valued at $10m and up, precious metals, bonds and many many more!
Real Estate Loan Terminology
Loan To Value (LTV)
What is loan to value?
Loan To Value is is the loan amount vs the value of the asset as a percentage. For example; an asset may be worth $100 million and the loan needed is $60 million thus the loan to value is 60%.
Loan To Cost (LTC)
Loan To Cost is a term used to describe the amount of borrowings in respect to the amount of costs associated with the construction of the property until completion. There are two inclusions in the loan:
- Hard costs – which are costs incurred to start the developments which would almost include the land fee and construction expenses.
- Soft costs – are charges made buy lawyers, architects and other overhead costs.
Gross Development Value can help you work out the financial viability of the proposed property development project, it is most widely used for large projects. It is the anticipated value of the property/development after completion of construction.
Please note: Our Disclaimer Applies
Your property may be repossessed if you do not keep up repayments on a mortgage or any debt secured upon it.