Knowing that going in can allow you to properly set up and arrange and administer the construction financing for each phase of the project.
Too often, the builder, especially for one time or first time build situations, tends to just put one foot in front of the other and only looks after the immediate need without any real consideration of how what gets arranged today can impact the financing that is going to be required down the line.
The key to construction financing is to have a phase of work completed at a time where the money invested into the project is sufficient in scope and amount to significantly increase the market value of the overall real estate, which then provides the basis for additional funding to be secured for the next stage.
In order to accomplish proper construction financing, the construction loan amount and draw schedule for each phase of work has to match up with with the projected market value. If there isn’t some type of reconciliation to funding and work to be completed and ending market value, then the project can become under funded and stuck looking for additional equity capital from somewhere.
One of the ways to avoid a poor construction financing plan in the first place is to start and stay working with the same construction financing broker throughout the process. This continuity in the overall process can pay big dividends during the life of the project. Too much fragmentation among different brokers and lenders can lead to considerable cash flow management problems that should be avoided at all reasonable costs. A experienced construction mortgage broker is going to help you focus in both on the big picture as well as moving the project through some of the administrative things that can hang it up in the draw management process.
If you’re in the middle of a construction project or planning construction financing for your next build, I suggest that you give me a call so we can discuss your requirements and outline a plan that will provide complete and timely funding.