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.