If you’re an active builder and developer, working most in the same localized market, there is a good chance that your going to be fairly well in tuned with you construction financing sources of supply. If there are any subtle changes in money that’s available at a given time, or changes in costs and terms from the lenders prepared to fund your deals, its not likely going to come as a bit surprise to you.
But when you’re looking at various projects in other locales than what you normally work, or even in areas you’ve never had a construction project before, don’t automatically expect that all construction mortgage lenders are going to act in the same fashion towards opportunities in the market. This regional diversity among construction lenders can be seen in both bank and private lenders. Just because a bank, for example, is across Canada, certainly does not mean that their policies for granting construction loans are going to be the same every where they operate. There are likely going to be adjustments or criteria that best fits their risk assessment approach in the local market.
The same goes for private mortgage lenders. With private lenders, most of what can be different is going to be related to price and exit strategy on the property being considered. As opportunistic lenders, private mortgage providers are going to price to what the local market will bear and what the competition is offering. This is not an absolute rule, but in general the more remote the location where the construction project is going to take place, the higher the cost of financing is going to be and the tighter the terms and conditions of construction financing as well.
Needless to say, one of the most important parts of planning out a project in an area you have not previously done business in is to 1) develop an understanding of the lender supply for your specific type of construction project, and 2) make sure that the true all in cost of funds can be covered by your cash flow and still yield the profit you’re after.
If you’re looking for construction financing in Southwestern Ontario, I suggest you give me a call so I can quickly assess your requirements and provide relevant construction loan options for your consideration.