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.
Commercial developments can be a risky industry and getting a funding can be tricky, especially if the developer and others involved does not have track record with any successful projects. There are cases sometimes to where the developers are owners on the completion and they could use other properties which they developed as a form of collateral when there’s enough equity. Below are some of the common types of construction loans that are available:
Land Development Loans
If an undeveloped land has to be made construction-ready, land development loans can be obtained. The land can be subdivided and can be sold as a number of parcels for a commercial or a residential use. This may also include installations of the water, power lines or the sewer.
Acquisition and Development Loans
A loan like this is appropriate if a raw land is ready for development or if this is developed already but will requirement improvements for its infrastructure or its existing buildings. Loans like these covers the purchase of the land as well as the cost on any necessary improvements before its development is completed.
Mini Perm Loan
This is actually a temporary loan which is usually being used for settling any outstanding construction or commercial property loan on a project where after its completion will produce an income. After several years of generating income, the mini perm loan will then be replaced with long term financing. Such type of loans are usually obtained through commercial banks.
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. It brings small investors together in pooling some funds for a certain project. They could generate money through fees which are paid by the investor as well as the developer.
The best thing with crowdfunding is that it is continuously growing in popularity and the government now is opening up ways for small investors without any net worth involved.