Any developer and investor that buys an underutilized land have special needs because of the financing which is needed to get the properties up to speed again. These clients should not just worry in selling, occupying or owning a project, but they should also have a specific financing so that they could make the land or building one that’s habitable.
Any commercial development can be very risky and getting the funding is a tricky one if the developer and others who are involved does not have track record with any successful project. Sometimes where the developers are the owners upon the completion and can utilize other properties which they developed as a collateral when there’s enough equity on it. Below would be some common types of construction loans which are available today:
Land Development Loan
If ever a land that’s undeveloped should be made construction-ready, there’s a land development loan that can be obtained. The land can be subdivided and can be sold as a number of parcels for a commercial or a residential use. It may also include the process of installing the power lines, water or sewer.
Acquisition and Development Loan Option
Loans like these are considered appropriate when a raw land is ready for development or perhaps when it’s already developed but still requires improvements on its infrastructure or on its existing buildings. This loan also covers on the purchase of the land and the cost on its improvements that are necessary before the completion of the development.
Mini Perm Loan Options
This would be a temporary loan that is used mostly in settling an outstanding construction or commercial property loan on a project to where when it’s completed, it will produce income. After 5 years of generating income, the mini perm loan is then replaced with a long term financing. These kind of loans are usually obtained through commercial banks.
Takeout Loan Option
Takeout loans will give a permanent financing on projects to where temporary loans like a short-term construction loan exist. Many lenders usually need developers in securing a takeout loan first before they will be granted with the short-term loan.
This is actually a new kind of commercial project financing. This brings together small investors to pool some funds for certain projects. They are able to make money through fees that are paid by the investors and developers.
The best thing about it is that crowdfunding is now growing in popularity and that the government is also now opening up ways for small investors without net worth involved.