Condo Development Inventory Loan
“Condo Development Inventory Loans Are Readily Available For Finished Projects”
Condo development inventory loans are essentially short term financing that is arranged against the fair market value of finished condo units that are either unsold or sold and waiting to close.
There are three basic reasons why a developer would want to secure a condo inventory loan.
The first reason has to do with cash flow. There are times at the end of a condo development when the project is out of cash and is basically waiting for proceeds to come in from condo sales. A condo inventory loan would be used in this case to provide incremental capital to the project to cover the monthly operating costs which would include the debt servicing on the primary construction loan.
A second reason for a condo development inventory loan would be to pay out the construction mortgage in place. Condo inventory loans are priced off of completed inventory that can be sold on the open market, so the risk associated with this type of construction mortgage financing is considerably less than the risk associated with actual construction. As a result, the cost of funds for a condo inventory loan can be significantly less than the construction loan outstanding and there may be a considerable cost saving to refinance the construction loan with a condo inventory loan, even if its only going to be outstanding for a number of months.
A third reason for a condo inventory loan is to draw equity out of the existing project, based on the increase in value from the completion of construction, and invest it into a new project that the developer wants to get going or is in the middle of.
In any of these cases, the process for getting a condo development inventory loan is fairly straight forward as we are talking about new condo units or inventory items where the value is going to be easy to determine through a third party appraisal. Depending on if the condo inventory has been presold or not, condo inventory lenders will look at financing between 65% and 75% of the value of the inventory.
The more presales that exist, the higher the loan to value will be.
Once again, because we are talking about financing finished condo units that in many cases are already sold and waiting for closing, the process for assessing an application for condo inventory financing can be completed rather quickly with funds being available shortly there after.
If you are in need of a condo development inventory loan or would like to know more about them, I suggest that you give me a call so we can discuss your requirements together and go over potential financing solutions that meet your needs.
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About the Author Joe Walsh
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel