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Secret Password for 1 Superb Condo Construction Loan

Commercial Mortgage Broker > Commercial Mortgage Broker News > Condo Construction Loan > Secret Password for 1 Superb Condo Construction Loan

Condo Construction Loan, secret will self destruct in 30 seconds

When you talk about loan to value of a for sale condo construction deal many lenders want to use as the value the net sales price after paying 5% selling brokerage commission. Well that is great and all but its bad math! The value is the projected selling price.  Riddle me this. When you value a shopping center to determine LTV based on appraised value. Does any appraiser deduct from the value a 3% selling commsion, which is typical broker fee for commercial property? No! So why should one deduct selling broker fees on condo deals! Dont let these lender fool ya…

If lender forecloses they have a property worth the selling prices of each unit. Yes, there are costs of sale just like any other property type but when you talk about the value of the project, and the loan to value, if you want to do proper math it must be the value before any closing costs.  BOOM got everyone an extra 5% in value.

Commercial Mortgage Broker Cracks the Condo Construction Code

What is a condo construction loan?  One of the common misconceptions in the commercial real estate finance industry is that the value of a condominium project should be based on the net sales price after paying selling brokerage commissions and other closing costs.  The truth is that the value of a condominium project should be based on the projected selling price, not the net sales price.

When you think about it, it makes sense. If a lender were to foreclose on a condominium project, they would have a property worth the selling prices of each unit. Of course, there will be costs of sale just like any other property type, but when it comes to determining the value of the project and the LTV ratio, the proper math is to use the value before any closing costs.

By using this method, developers can potentially increase the value of their project by 5%, giving them more leverage when negotiating with lenders. This is a Condo Construction Loan secret, and if you’re not aware of it, you could be missing out on significant value.  It’s important to keep in mind that every lender is different and may have different policies and requirements when it comes to evaluating a construction loan for a condominium project. However, by understanding the proper way to calculate the LTV ratio, developers can help to optimize their capital structure.

It’s a Condo Construction Loan secret, and one that could save you a lot of money in the long run.  This may not seem like a significant difference, but in the world of commercial real estate development, every percentage point counts.

Condo Construction Loan
Secrets of a Condo Construction Loan


Commercial Loan Brokers can help you obtain Condo Construction Loan

A commercial mortgage broker is a professional who specializes in helping businesses and investors secure the funding they need to purchase or refinance commercial properties. This can include everything from office buildings and warehouses to apartments and condominiums.  There are many types of home loans.  A popular types of commercial real estate that a mortgage broker can help with is a condo construction loan.

Condo construction loans are used to finance the building or renovation of a multi-unit residential property, such as a condominium complex. These loans are typically structured as a construction-to-permanent loan, which means that the loan will convert to a traditional mortgage once the construction is complete.  A strong commercial loan broker can help you

  1. Access to a wide range of lenders.
  2. Provide in-depth knowledge of the commercial lending market and guide you throughout the loan process.
  3. A mortgage broker can help you gather the necessary documentation and present it with your best foot forward to increase your chances of getting approved.
  4. A mortgage broker can use their experience and connections to facilitate terms and rates for you.

Construction Draws like a Wells Fargo construction loan

A condominium construction loan draw request, whether for an fha construction loan or conventional, is a request made by the developer of a condominium project to the lender for a disbursement of funds from the loan.  These requests are typically made at specific stages of the construction process, such as when the foundation is completed or when the framing is finished. The lender will usually require an inspection of the work before releasing the funds to ensure that the construction is proceeding as planned.

Draw requests are typically made on a regular basis until the project is completed, and the loan is fully disbursed.  This is different from the types of land loan lenders near me and involves vertical construction not just horizontal land development.


2 Responses
  1. Dave

    As you wrote “BOOM” – OK, this makes total sense and is logical “condominium project should be based on the projected selling price, not the net sales price.” Finance is tricky, lot’s of ways to hide stuff in plain sight, this is why I am constantly reading and researching. We build condos as well as purchase condo projects and 5% is a ton of money when you have a large project. So understanding this is important, you all might be hearing from us soon her at CRG.

  2. Henry Jordan

    Timing is everything, I am in the process of getting our 28 condo unit project started (we are in the early stages still) and have heard all kinds of numbers being thrown around in reference to the condo construction loan. Very confusing and honestly every broker we have consulted seem to be good but we also feel they are stacking the loan in their favor to make sure they get paid out as much as possible. Instead of making sure we get the best loan. What you are saying here is a bit of an eye opener and now we need to take a look at all these loans proposals again.

    Honestly, after reading this blog and some of your other blogs, I feel like the loan officers or brokers are a bit out of touch and maybe they do more residential loans than commercial.. I appreciate the knowledge you are sharing, very helpful

    Thank God for Google, that is how we found this blog

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