As a real estate developer or investor, you're probably very familiar with long-term mortgage financing. Perhaps, you've been funding your real estate projects with it. But truth be told, mortgage financing is actually applied to renovation projects, not development projects, such as hotel real estate development or resort real estate development.
Perhaps you're wondering why this were so. Well, we are about to reveal some interesting secrets about two different things. A development project and a renovation project are two different creatures. On the same note, the funding for each type of project is not the same. One needs a development loan and the other -- a mortgage loan works just fine. It's understandable that you will be a bit surprised, confused or shocked. To set your course right the next time around, you need to understand and embrace these revelations.
Long-term mortgage financing is designed for acquiring and owning property in the long-term. Any property acquisition can be funded with it -- land, condominium, house, resort and the like. The acquired property is usually owned for years, but may also be rented or sold out. Meanwhile, real estate development financing is designed for acquiring land and constructing buildings. Again, new structures are to be built, not just renovated or remodeled.
After completion of the project, say a hotel real estate development, the entire project is sold and the loan is paid. However, you may retain part-ownership of the project by getting a long-term mortgage loan for that particular purpose, but not until the project is entirely sold and the development loan fully paid.
The development project should generate a substantial profit. Ideally, you should have it realized in the form of equity, not cash, to stave off hefty taxations. However, the success of this tactic depends on taxation laws governing your locality. You should also maintain your mortgage loan at a manageable level; keep it at minimum and make regular repayments. That's the only way to make sure you retain ownership of the project you so dearly labored for.
By now you should understand that real estate development is one thing and real estate renovation is another. But more importantly, you should understand that mortgage financing isn't the best funding for real estate development projects.
Know that when you apply for development financing or development loan, you are not trying to get money simply to buy a piece of land or remodel an apartment building. The truth is that you are trying to get funding for both land acquisition and building construction. With that, you need approval for several documents such as development plans, costing, and feasibility report.
Don't be like some real estate developers who mistakenly obtained mortgage financing for their development projects. A hotel real estate development project or any other development project for that matter, is best funded with real estate development financing, not mortgage financing. Remember that so you won't have to pay unnecessarily for loan cancellation or refinancing.
Perhaps you're wondering why this were so. Well, we are about to reveal some interesting secrets about two different things. A development project and a renovation project are two different creatures. On the same note, the funding for each type of project is not the same. One needs a development loan and the other -- a mortgage loan works just fine. It's understandable that you will be a bit surprised, confused or shocked. To set your course right the next time around, you need to understand and embrace these revelations.
Long-term mortgage financing is designed for acquiring and owning property in the long-term. Any property acquisition can be funded with it -- land, condominium, house, resort and the like. The acquired property is usually owned for years, but may also be rented or sold out. Meanwhile, real estate development financing is designed for acquiring land and constructing buildings. Again, new structures are to be built, not just renovated or remodeled.
After completion of the project, say a hotel real estate development, the entire project is sold and the loan is paid. However, you may retain part-ownership of the project by getting a long-term mortgage loan for that particular purpose, but not until the project is entirely sold and the development loan fully paid.
The development project should generate a substantial profit. Ideally, you should have it realized in the form of equity, not cash, to stave off hefty taxations. However, the success of this tactic depends on taxation laws governing your locality. You should also maintain your mortgage loan at a manageable level; keep it at minimum and make regular repayments. That's the only way to make sure you retain ownership of the project you so dearly labored for.
By now you should understand that real estate development is one thing and real estate renovation is another. But more importantly, you should understand that mortgage financing isn't the best funding for real estate development projects.
Know that when you apply for development financing or development loan, you are not trying to get money simply to buy a piece of land or remodel an apartment building. The truth is that you are trying to get funding for both land acquisition and building construction. With that, you need approval for several documents such as development plans, costing, and feasibility report.
Don't be like some real estate developers who mistakenly obtained mortgage financing for their development projects. A hotel real estate development project or any other development project for that matter, is best funded with real estate development financing, not mortgage financing. Remember that so you won't have to pay unnecessarily for loan cancellation or refinancing.
About the Author:
Get extra about Wade Entezar. Or, check out the latest projects by Wade Entezar here.
No comments:
Post a Comment