If you are pondering on a real estate development project, you might already be planning to take up a long-term mortgage financing loan. But before you do, stop and think. Your hotel real estate development project doesn't need funding from a mortgage loan, but from a development loan. Really, mortgage is great for building renovation or land acquisition projects, but not for development projects.
You might be in a state of shock if you were told that there's a substantial gap between a development project and a renovation project. Similarly, you might be surprised that long-term mortgage financing may not necessarily work as well as real estate development financing. Each has its own function and purpose. As player in the industry, you might think you know enough of the ins and outs of the trade. But you are about to find out something you've probably never heard about before.
With a mortgage financing, you are acquiring a property for the long-term, say 15 to 30 years. The property here can be a parcel of land, an apartment unit, or a residential building, which you intend to use, lease or sell in the future. With real estate development financing, you are getting funds for a development project, which comprises two parts: land and building plans.
With the funds from the development loan, you can then complete the project, sold it and pay back the loan. That's not a very long time really. It could be more than a year, but eventually you will have to let go of the project and give up "ownership". If you want to retain co-ownership, that's the time you apply for a mortgage loan to buy part of the project and own it long-term.
Of course, as a business-minded individual, your goal is to realize a profit. With the use of careful planning, you should be able to realize a profit applied as equity in the investment and to keep your mortgage loan at minimum. Realizing profit in equity form not in cash form is one way of keeping taxes at bay, although not in all cases. Applicable taxation laws are worth checking.
It's imperative that you already gained a good grasp of what is renovation and what is development. In particular, you must know that long-term mortgage funding isn't the way to go if you plan to embark on real estate development. We hope you're no longer in a state of shock or surprise. These things should be easy to digest for you.
If you apply for development loan, always remember that you're requesting funds for both land acquisition and building construction. With this in mind, you will need to do some paperwork regarding your development project. Development plans, cost estimates, and feasibility report are just some of the documents you have to prepare for approval.
Many real estate developers make the mistake of finding and purchasing land first, and applying for mortgage financing later for the building construction. Sadly, they are likely to end up compelled to cancel the mortgage and acquire the right funds for a hotel real estate development or whatever development project they are planning to do. In the process, they waste precious time and money.
You might be in a state of shock if you were told that there's a substantial gap between a development project and a renovation project. Similarly, you might be surprised that long-term mortgage financing may not necessarily work as well as real estate development financing. Each has its own function and purpose. As player in the industry, you might think you know enough of the ins and outs of the trade. But you are about to find out something you've probably never heard about before.
With a mortgage financing, you are acquiring a property for the long-term, say 15 to 30 years. The property here can be a parcel of land, an apartment unit, or a residential building, which you intend to use, lease or sell in the future. With real estate development financing, you are getting funds for a development project, which comprises two parts: land and building plans.
With the funds from the development loan, you can then complete the project, sold it and pay back the loan. That's not a very long time really. It could be more than a year, but eventually you will have to let go of the project and give up "ownership". If you want to retain co-ownership, that's the time you apply for a mortgage loan to buy part of the project and own it long-term.
Of course, as a business-minded individual, your goal is to realize a profit. With the use of careful planning, you should be able to realize a profit applied as equity in the investment and to keep your mortgage loan at minimum. Realizing profit in equity form not in cash form is one way of keeping taxes at bay, although not in all cases. Applicable taxation laws are worth checking.
It's imperative that you already gained a good grasp of what is renovation and what is development. In particular, you must know that long-term mortgage funding isn't the way to go if you plan to embark on real estate development. We hope you're no longer in a state of shock or surprise. These things should be easy to digest for you.
If you apply for development loan, always remember that you're requesting funds for both land acquisition and building construction. With this in mind, you will need to do some paperwork regarding your development project. Development plans, cost estimates, and feasibility report are just some of the documents you have to prepare for approval.
Many real estate developers make the mistake of finding and purchasing land first, and applying for mortgage financing later for the building construction. Sadly, they are likely to end up compelled to cancel the mortgage and acquire the right funds for a hotel real estate development or whatever development project they are planning to do. In the process, they waste precious time and money.
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