Finding Finance In Auckland For Commercial Real Estate Development
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If you are a new to property development and are venturing into the commercial real estate market for the first time, it can be very difficult for you to obtain funding resources to finance your real estate project. This is because financiers need to have trust in new borrowers that they will pay the interest during the life of the loan (this is known as servicing the debt) and at the end of the project that the money will be repaid on the scheduled date. Clearly, without a proven track record, this makes it very difficult to secure any adequate commercial real estate development finance. But without finance the project will never happen. It is a bit of a Catch 22 situation for new property developer. However challenging it may to obtain funding, it is much easier for an individual to secure commercial real estate development finance provided the following tips are adhered to.
Assessing Commercial Development And Finance
The initial step towards successful financing of your commercial real estate project is the identification of an area that has opportunities for you to invest in. With the real estate market being very wide, it is important for anyone but especially new developers to find a part of the market they can focus on. For example, do you want to develop retail units, office blocks, distribution warehouses or residential apartment blocks? It is important that you answer this and then learn about the ins and outs of the different types of building. This can help you with analysing your property development options. Once you have identified the type of building you want to develop, then you can look for a location that will provide you with a good profit from the project. Some suburbs will be more suited to certain types of commercial property. This should be obvious from simply looking around the area and seeing what else is in the locality. You can also talk to commercial real estate agents and ask them what is needed in the area or what will be more profitable. Through this step alone, you improve your chances of making a profitable and successful property development career.
Researching Development Finance Options In Auckland
Once you have identified the best area and type of building for you to invest in, then it is important to start investigating your sources of finance. Many new real estate investors often find themselves confused and quite unsure of where to source the necessary funds for their real estate projects. If you thought the residential mortgage market was complicated, wait until you start looking into commercial property financing. There are many different types of finance ranging from commercial mortgages to joint ventures and lots of variations in between. You need to talk to professionals who can explain the benefits and disadvantages of each type of financing arrangement.
One of the most common funding options where you can obtain real estate development finance is by taking a commercial mortgage on the property. This is a similar form of funding to residential mortgages in that you borrow money for a given period of time with regular interest payments made and the property held as security by the lender. However, there are some significant differences. For one, you will need a bigger deposit, often up to 40 per cent of the purchase price. This is because the risks area higher for the lender so they want to minimise their exposure. The length of the loan will be much less too. Commercial mortgages are typically between ten and fifteen years. However, it is usually possible to roll this over or to get another mortgage at the end if the building is producing sufficient revenue to cover the interest payments. For real estate development projects as opposed to investment in an existing building, you can also expect that the funding will be made in stages as different aspects of the building are completed. This is because in the first place, the security against the loan i.e. the building will not be worth a great deal. But as more stages are completed, the value will go up and so the lenders will be willing to loan more money against the securitised asset.
Another way through which you can access funding for your real estate project is by obtaining a loan. Most of the large financial organisations and banks lend their clients development finance for repayment at a later date. Obtaining a loan for your real estate development can be a very good stepping stone for a successful real estate investing. The good thing about taking a loan for a real estate investment is that repaying of the loan is usually very easy. Once you have build your real estate, you can decide to sell it out at a cost that will pay back the loan or rent it out so as to pay your loan in instalments. A loan can be a very powerful way for you to finance your real estate project.
Finalising Commercial Real Estate Development
After you have obtained sufficient funds, it is important to also take a look at the real estate market. You should not go blindly into commercial real estate development since you might face too much competition that can deter you from succeeding in the field. You can identify a market gap and maximise on it for a successful real estate investment.
New and experienced commercial property developers can find Auckland development finance by following some basic steps. For new developers in particular, they need to be willing to take advice from the experienced people in the industry. This is especially the case when it comes to the financing of the project. Seasoned commercial finance brokers like Global Pacific Corporation, have lots of knowledge about many different types of commercial real estate development and how to fund the various projects. Their knowledge can be invaluable so be prepared to listen to their financial advice.
If the above techniques are properly taken into account, finding development finance for commercial real estate can become a lot easier.
For more information, take a look at this website http://www.globalpacific.co.nz.