A condo inventory loan on completed condo units can be utilized in a couple of different situations.

The most common reason for getting a condo inventory loan is due to the fact that its going to take some time to get the finished condo units sold and have their proceeds available to be applied to the outstanding construction loan.

A condo inventory loan on finished units can typically be secured for considerably less than the construction loan that is priced to include the risk of construction that has now passed. This is effectively an equity loan based on the market value of the finished product and can be put into place fairly quickly once an appraisal of the current market value is completed.

Along these same lines, the builder, developer or property owner may not have to wait too long to get proceeds from the condo sales, but right at the end of the project money is running out and they need some type of a bridge loan to provide funds to cash flow the project for a matter of weeks or one or two months.

This once again could be done through a condo inventory loan based on the fair market value of the finished units.

The third reason a builder, developer, or property owner would look to secure a condo inventory loan would be in the event that they were starting another project and needed to draw funds out of an existing project to get the next project off the ground. If there is enough equity in the condo project that has just been completed, a condo equity loan can be put into place to free up the profits that the builder or property owner are waiting to collect from condo sales.

The average loan to value on a condo inventory loan is 65%, but if the condo development has a significant number of pre-sales on the books that are just waiting to close, the loan to value ratio can go as high as 75%.

In many cases, the only major supporting documentation that a real estate inventory lender will require is an up to date appraisal, allowing the process to be completed fairly quickly from the time of application to funding.

If you are at or near the end of a condominium development project and would like to consider your condo inventory financing options, then I suggest that you give me a call so we can quickly go over your requirements together and discuss different alternatives available to your in the market.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

The post Condo Inventory Loans first appeared on Ontario Construction Loans And Mortgage Financing.

“Condo Inventory Loans May Be Required To Save Your Cash Flow and Keep The Remainder of Your Project On Track”

There can be more than one reason for securing condo inventory loans, but the most common one is to inject funds into the project to keep the cash flow on track.

By definition, condo inventory is like any other type of finished good inventory in that there needs to be a completed product to sell or near completed product.

Sometimes, near the end of a condo project where the basic exit strategy for paying out the construction loan is through the sale of condominium units, the condo registration gets delayed causing the inflow of proceeds from condo sales to also be delayed.

With the condo units in a sufficiently complete state to qualify for condo registration, the construction risk has basically been eliminated so incremental mortgage financing can be made available in many cases to provide more capital to the project.

The additional capital is typically used to pay the ongoing monthly costs of the project which are mostly construction loan interest. There may also be some amount of trade payables outstanding that were expected to be retired by the first wave of condo sales proceeds, but are now getting older with suppliers demanding payment as the initial condo sales are waiting to be completed.

In fairly rare cases where the registration delay is considerable, the construction lender may demand repayment of the construction loan which could also potentially be paid out by a larger condo inventory loan.

As long as there is cash flow available to service the monthly interest costs, the construction mortgage holder will likely be more than happy to collect additional interest so long as the funds are not required for reinvestment right away into another project.

When additional funds are secured, the lender will also want to have clear disclosure as to how the funds are applied to make sure the capital is used within the current project and not diverted to another development. If trade payables are outstanding, a condo inventory financing group may even go so far as to require that the outstanding accounts be paid directly by the lender during the mortgage disbursement process to assure that everyone is paid up so there will be minimal chance of a supplier dispute against the project.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

The post Condo Inventory Loans Are Mostly For Additional Cash Flow first appeared on Ontario Construction Loans And Mortgage Financing.