Certainly there is construction year round in Ontario, but the bulk of all completed work happens in the period between snow falls.
So while many land development and building projects are in the planning stage for completion in 2013, the financing to carry the cash flow of many of the projects has not even been applied for yet.
As I have previously written, the working assumption for property owners, builders, and developers is that lining up financing will be an easy, straight forward process that can be started and completed just before the work commences.
This can even be the opinion of experienced borrowers that have difficulty in the past with the project, but still put off getting the funding in place for their next project to next to the last minute.
In my opinion, waiting to close to the time you’re going to want to start building is always asking for trouble which leads to delays and worse.
Getting construction financing or a land development loan in place and getting a good deal collectively require time to target the right sources of financing for your particular project type and geography.
By starting early, you may even find that you have time to make adjustments to the plan and budget that better meets a lender’s criteria versus force feeding the final project plan onto rigid lenders, hoping to get a financing fit.
For example, for certain types of projects relevant lenders may have approved contractors or even approved material sources that need to be used for any projects they end up financing. If the lender offer is a great fit for your needs, but you can’t meet certain requirements that could have been addressed earlier in the planning process, then a potentially optimum financing commitment will be lost when it didn’t need to be.
Lenders can also require incremental third party reports to support valuations, cost estimates, and so on. If there is not enough time to complete the requests for incremental data, you once again can lose out on otherwise acceptable and perhaps preferred financing.
And when that happens, you can’t assume that the alternative construction loan source you end up working with is going to provide as good a rates or terms.
So if you have a real estate development project or construction build of some form that will require construction financing in 2013, the two keys to getting the financing in place that you require is to 1) start early, and 2) work with an experienced mortgage broker that has placed construction loans for your type of project, in your geography.
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If you have an “A” credit financing scenario for a commercial property, then its likely that a low cost commercial property loan can be secured.
But depending on the property and its use, there can be considerable variation among lenders in terms of interest in the deal and rates and terms that can be offered.
Larger income producing properties will attract the most attention from main stream lenders, so there is likely not going to be a challenge to locate a market competitive deal.
Where it can be a challenge is with smaller value properties with more specialized uses.
Commercial properties such as gas stations, self storage facilities, and so on can have an excellent financing profile, but will not be of interest to all lenders at all times in all areas.
This is where it can be some work to get a commercial property loan in place that provides the rate and terms you’re looking for.
Timing can be a significant factor in this regard as well with lenders coming in and out of the market according to the strength and weighting of their portfolio towards different types of properties.
For instance, its not uncommon to see some of the major banks run hot and cold for lending on specific property types according to their own needs more so than the market.
One of the keys to locating and securing a commercial property loan, especially for a more niche type of real estate, is to 1) start early, and 2) get some assistance from a financing specialist.
Considerable time can be wasted knocking on the wrong doors, leaving you scrambling to come up with any type of option that will work with the time you have available.
And as I mentioned earlier, the offerings that can exist in the market can vary considerably from one “A” lender to another, so its important to be working with enough market intelligence to be able to zero in on the options that are most relevant to you situation and requirements, at the time that you will require the funding.
Every commercial property loan will be secured by mortgage security as well, so you will have to consider the type of mortgage agreements offered by relevant lenders as well as the type of mortgage registration and subordinate mortgage restrictions that may come with an approval for funding.
While in general the mortgage market as a whole has more options for commercial financing now that in the recent recessionary period starting in 2008, more options can also create more complexity in understanding the different options available to you.
This is still another reason why working with an experienced mortgage broker can be beneficial to ending up with a commercial property loan that meets your requirements now and into the future.
If you have a commercial property financing need right now, or are planning ahead for a future requirement, I suggest that you give me a call so we can quickly go through your situation together and discuss some of the different options that are likely going to be available to you in the “A” credit market.
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Private mortgages fall into what we call the sub prime lending category which basically includes all non bank or institutional lenders that do not price their financing off the prime rate.
In many cases, private money is a secondary form of financing, but that doesn’t have to be the case, especially when time is of the essence.
You will see references to private mortgages as hard money as well and there is many degrees of hardness to consider depending on the financing request and the lender.
And perhaps this is the best place to have a discussion on what I’m referring to as private mortgage logic.
Hard money definitions, for the most part, are focused in on equity lending where the equity in real estate is the primary consideration for making a loan. The term hard can relate to a number of different things depending on who you’re talking to such as hard to find money, hard to work with if payments are not made, hard cost or higher cost of funds and so on.
As a private mortgage broker, the one hard money notion that makes very little sense to me is that money can be procured from a private lender where the risk of loss to the lender is disproportionately higher than their potential return.
The idea here is that true hard money can be acquired for situations that don’t make any sense from a risk and reward point of view, but because a high interest rate will be charged, private investors will still advance money.
One of the most common examples of this is the $0 down mortgage to someone with some combination of poor credit and cash flow.
While it is certainly possible to get this type of private mortgage, its not probable, and the reason why is that it doesn’t make economic sense for both the borrower and the lender.
For the most part, private loans are secured by equity in real estate so in the event of default the private lender has the ability to foreclose on the borrower and recoup the money advanced without it costing them any money.
This is what we call “make sense lending”.
And each situation is going to be different.
There will be situations where the loan to value considered by a lender will be higher than the average and situations where its also lower.
But what is true far more often than not is that each deal must stand on its own merits and if the risk of lending and the cost associated with that risk make sense to both the borrower and lender, then its very likely financing will be able to be arranged.
When this is not the case, the money will certainly be “hard” to find.
Some people conjure up images of private lending similar to some type of loan shark where if you don’t get paid someone is going to break your legs and high risk lending can be justified in this fear of retribution fashion.
But in reality, this couldn’t be further from the truth, at least in anything I have seen or been a part of over many years of working in the mortgage business.
Private lending exists because their is a viable need for it in the market place that is not being met by banks and institutional lenders. This is true for both residential and commercial property lending.
Private lenders are investors that choose private mortgages as an investment vehicle no different than any other type of investment where the potential return and investment risk or weighed before any money changes hands.
And if a lending scenario is presented that allows the lender to acceptably manage their risk of loss in exchange for a cost of financing acceptable to the borrower, then a loan agreement can be entered into.
The bottom line here is that lending requests that don’t make business sense or the don’t have any common sense to them will not likely attract private money.
Understanding this can save you a lot of time chasing after something the highly unattainable.
That being said, there are also no absolute rules when it comes to private lending either as individual lenders can also do whatever they choose. But once again, just because something is possible doesn’t make it probable.
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