Real estate developers are very knowledgeable about the usual 15-year and 30-year mortgage. Long-term real estate funding, as well as line of credit and mortgage financing, worked in the past and continues to work. But really, these types of financing have been used for renovation or reconstruction, not really for real estate development projects like hotel real estate development.
You must understand the difference between a new development project to be constructed and an existing one to be refurbished. Then too, you must understand the difference between mortgage financing and real estate development financing. You might wonder about the importance of telling the difference between two seemingly the same things. Perhaps you have been interchanging the two terms all your life. Or perhaps, you never thought that development project is an entirely different thing from a renovation project. Well, you are about to find out some interesting details.
Long-term mortgage financing is designed for acquiring and owning property in the long-term. Any property acquisition can be funded with it -- land, condominium, house, resort and the like. The acquired property is usually owned for years, but may also be rented or sold out. Meanwhile, real estate development financing is designed for acquiring land and constructing buildings. Again, new structures are to be built, not just renovated or remodeled.
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.
You'll make it certain that the project generates a profit, which you can have in the form of cash or equity in the project. Realizing profit in cash is a fine way of minimizing taxes, but you have to consult existing taxation laws to verify this. Also, don't forget to manage your mortgage loan properly, to assure your continued ownership in the project.
By now you should understand that real estate development is one thing and real estate renovation is another. But more importantly, you should understand that mortgage financing isn't the best funding for real estate development projects.
With real estate development financing, you are not merely asking a financial institution to provide you funds for purchasing any property. You are asking them to help you fund a whole project of buying land and constructing infrastructure. To get approval for the development project loan, you need to have your development plans, costing, and feasibility study approved.
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 must understand the difference between a new development project to be constructed and an existing one to be refurbished. Then too, you must understand the difference between mortgage financing and real estate development financing. You might wonder about the importance of telling the difference between two seemingly the same things. Perhaps you have been interchanging the two terms all your life. Or perhaps, you never thought that development project is an entirely different thing from a renovation project. Well, you are about to find out some interesting details.
Long-term mortgage financing is designed for acquiring and owning property in the long-term. Any property acquisition can be funded with it -- land, condominium, house, resort and the like. The acquired property is usually owned for years, but may also be rented or sold out. Meanwhile, real estate development financing is designed for acquiring land and constructing buildings. Again, new structures are to be built, not just renovated or remodeled.
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.
You'll make it certain that the project generates a profit, which you can have in the form of cash or equity in the project. Realizing profit in cash is a fine way of minimizing taxes, but you have to consult existing taxation laws to verify this. Also, don't forget to manage your mortgage loan properly, to assure your continued ownership in the project.
By now you should understand that real estate development is one thing and real estate renovation is another. But more importantly, you should understand that mortgage financing isn't the best funding for real estate development projects.
With real estate development financing, you are not merely asking a financial institution to provide you funds for purchasing any property. You are asking them to help you fund a whole project of buying land and constructing infrastructure. To get approval for the development project loan, you need to have your development plans, costing, and feasibility study approved.
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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