Real Estate Development Loans
For transaction secured by real estate capital in the development stage, certain property requires evaluating project characteristics that include, but are not limited to:
- Property/project location
- Physical characteristics of property, e.g., condition, design, etc.
- Property value
- Economic conditions, e.g., trends, local/regional/national drivers of demand/supply, etc.
- Market/competitive analysis, e.g., absorption, vacancy, rental rates, etc.
- Project economics, e.g., stability, predictability and diversity of cash flow, expense/reserve standards, debt service coverage ratios
- Sensitivity analysis to changes in interest rates; rental rates occupancy and expense levels, etc.
- Project management, e.g., character, experience, financial capacity
- Regulatory environment, e.g., zoning, approvals, flood zones, etc. In less complex, smaller transactions, e.g., residential real estate, small, noncomplex commercial real estate, appraisals, or other valuation materials may provide sufficient data upon which to assess and document the above.
Real estate development projects are designed to increase the value of property through construction and other enhancements. These projects generally require a number of financing arrangements throughout the process. For example, initial financing may be secured using the property itself as collateral. During the construction process, bridge loans may be required to ensure the completion of the project and to purchase necessary materials before payment is made on the finished product. Additionally, loans for real estate development projects may be necessary to fund promotional and advertising campaigns to attract tenants and boost the development's chances of success in the competitive commercial real estate marketplace. For apartment buildings, these efforts may go toward promotional rates and offers to attract residents to the location. Shopping malls and retail sites are often pre-sold to tenants before ground is broken on the new commercial development. All these costs and expenses can be covered through loans for real estate development purposes; however, obtaining these loans can sometimes be challenging for construction companies in the modern lending marketplace.
CNF Exchange offers an easy-to-use platform for uploading funding requests quickly and conveniently. This can help construction firms acquire the real estate development loan solutions they need to start work on their new projects and to complete existing plans in a timely way. Additionally, the CNF Exchange team can provide in-depth advice and guidance on setting up a residential construction loan checklist and funding request for maximum impact. These services may provide an edge in the competitive funding market and allow construction companies to obtain the financing arrangements they need to succeed in difficult economic times.