I recently published forecast by the Construction Sector Council (CSC) shows considerable growth in Ontario based construction over the next 9 years in various parts of the province.

With the housing market leveling off in some areas, the majority of growth is expected to come from commercial, industrial, institutional, mining, and utilities projects.

Here’s the link to the full article … http://www.newswire.ca/en/releases/archive/May2011/24/c5996.html

The increased level of construction projects and spending is going to require increases in the pool of construction workers.

The construction industry as a whole is calling for 100,ooo new workers to enter the industry and receive training to cover off the estimated 27,000 new workers that will be required plus 73,000 new workers to replace retirements that are expected to occur over the next 8 years.

Much of the construction work outlined in the report is related to big projects around the project which of course are going to require construction financing for the most part.

So what does this mean for the small to medium sized construction projects that are also going to be seeking construction loans during the same period of time?

While its hard to have an accurate crystal ball, its likely that construction funding on average is going to be more available and more competitive that it is right now.

Larger projects from larger credit worthy borrowers are going to improve the financing portfolios of construction lenders, allowing them to diversity even further into smaller projects that may be considered higher risk due to borrower credit profile, industry, location, or some combination of these factors.

And because construction financing is a very lucrative form of mortgage financing, its going to attract more private money as well.

The real risk to smaller projects is likely not related to access to capital but more towards higher costs related to higher demands on the labor supply.

From a construction financing point of view, lots of larger projects are going to bring more profit potential into the market place which is going to attract more money to invest in construction.

If the CSC’s projections are accurate, the better part of the next decade is going to have a great deal of potential for those working in the Ontario construction industry and the rest of use working to get these projects funded properly for the respective owners, builders, and developers.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

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

For most builders and developers, the starting point for construction financing finds its roots in private mortgage financing.

As the builder or developer find success in the market, they may even incorporate mezzanine funding sources to expand faster and acquire more leverage for each project they pursue.

And at some point, a model for financing is in place and somewhat perfected with one or several different sources for financing.

In other cases, there is a construction financing model in place, but the builder and/or developer have a desire to continue to expand the model to 1) gain more access to capital, 2) increase leverage of existing equity; 3) lower the overall cost of debt, 4) diversify financing sources.

To continually work towards these goals, the builder or developer must maintain somewhat of a pliable business model to be able to adapt to the requirements of different lending or investing groups they may want to try and bring into the mix.

On the surface, all of this makes a great deal of sense to pursue for a growing company committed to being in the development business for years to come.

But in many cases, the builder or developer achieves a less than desirable level of business operations due to the constraints imposed by the amount of construction financing that can be secured at any point in time.

The reason for this is the same other capital intensive businesses do not achieve their growth and scale goals and that is a lack of understanding of how to collectively go about achieving the 4 goals listed above.

Builders, developers, and business owners in general work under the assumption that a lender or investor will change their business model to fund a construction business model. That having a good, solid, profitable business will be enough for a lender or investor to see their way clear to find someway to lend them money.

But that’s also like saying that the laws of physics that apply to engineering and construction can be altered to fit the needs of the individual as they so desire.

A lender or investor business model is developed on a set of principals and criteria that have been successful over time.

The key to accessing the capital they have available is to understand their business model and lending requirements and then trying to incorporate them into the builder or developers business model instead of the other way around.

In the marketing world, the business owner is always taught to work backwards from the customer in order to have a business model that can withstand competition and deliver a profit.

In the financing world, the business owner needs to work backwards from the lender in order to figure out how to access the amount of capital they require, for the leverage, cost, and terms they are seeking.

The best way to figure out how to advance your construction financing structure is to seek the help of an experienced construction financing professional who can help you better align yourself with the sources of capital that offer the type of funding you are seeking.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

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

Land development project financing or development construction financing is still a very elusive animal for many development projects in Ontario and across Canada.

Prior to the recession, development projects were everywhere as the industry had developed considerable demand over the last decade.

But when the recession hit, a considerable chunk of the money going into these development projects dried up and still hasn’t returned to the market.

The result has been a combination of out right development failures due to lack of capital and developers desperately searching for capital to keep their project alive and equity in the project in tact.

For the sources of money that do exist for development project financing, they basically have their pick of projects to go into and full bargaining control of what they want in return.

To say its a lenders market would be a gross understatement.

At the same time, regardless of the economic climate, good projects will always be able to find money. And when I speak of good projects I’m talking about a development project that 1) has a good location; 2) has demand in place for the finished project; 3) is well organized and managed; 4) has control of all the essential elements required to proceed; and 4) possesses all the required zoning, licensing, and regulatory requirements to proceed.

For projects that are missing one or more of these elements, money is going to be harder to find due to the existing unknowns. And the money you are likely to find will price the uncertainty into their cost of funds or most likely will not consider the project at all.

Now with interest rates threatening to go up, the economics for some projects may be falling out of reach.

With all this being said, there still is money available for development projects. Its just harder to find and harder to secure than in years past.

In order to increase your chances of success, one of the keys is to select a construction financing expert to work with that has direct access to active development project lenders and who has a track record of getting funding in place.

If you are in the process of planning out a land development project, or are in the middle of one and require development project financing, I suggest that you give me a call so we can go through your requirements together and discuss different construction development financing options that may be available to you.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

The post Development Project Financing first appeared on Ontario Construction Loans And Mortgage Financing.

“The Supply of Ontario Construction Loans Is Always More Challenged In The Prime Building Season”

We are now into July of 2010 and the construction financing season is into full swing.

With construction starts growing month over month for the last several months, the number of projects under way will start to impact the available sources of construction financing in certain areas.

Remember that the majority of Ontario construction loans come from private mortgage lenders and this category of lender, unlike a bank or institutional mortgage provider, has more of a finite supply of capital available to fund construction projects at any given time.

And with private mortgage construction financing being more specific to region and project type, there is a greater chance than supply will start to get constrained in the summer months compared to other times in the year.

That being said, there is no risk of the market running out of Ontario construction financing. But in certain areas for specific projects, the supply can become periodically constrained creating more opportunistic pricing for lenders who are prepared to lend in those areas.

Similar to any commodity market, supply and demand will impact pricing and terms of sale or terms of financing in this case. As a result, you could end up paying higher rates than you need to if you can’t find better construction financing options in the time available.

To make sure that you get the construction loan you’re looking for, the best approach is to work with a Ontario construction mortgage broker who covers both your area and the type of project you’re working on. Mortgage brokers that are more focused on construction financing will have a larger supply of relevant private lenders than mortgage brokers that place the occasional construction mortgage loan.

Construction mortgage brokers will also tend to work with private lenders that cover a broader geography. So if your local construction financing sources dry up or start to jack up their pricing, private lenders from outside the immediate area may be your best option.

But to access them, you’re going to have to be working with a construction mortgage broker covering your area.

If you’ve got a construction project in Southwestern Ontario that your planning or in the middle of, I recommend that you give me a call so I can quickly assess your situation and provide relevant Ontario construction loan options for your consideration.

Click Here To Speak To Construction Mortgage Broker Joe Walsh

The post Ontario Construction Loans In High Demand first appeared on Ontario Construction Loans And Mortgage Financing.

“If You Can’t Pass The Pre-sale Test, There Won’t Be Any Construction Financing Advances”

For larger construction projects where the exit strategy for the builder or developer to pay back the construction is through the sale of finished residential or commercial units being built, then the key to not only getting approved for a construction loan as well as getting draws advanced will be your ability to pass the construction lender’s pre-sale test.

First of all, each lender is going to have their own way of assessing the number of pre-sales that are going to be required to get construction funded, but typically the proceeds from presold units will need to equal the construction costs.

Its also not uncommon for a builder or developer to have most of the pre sales in place at the time of loan approval, but still requiring additional sales prior to the first draw advance. But just because you have a construction mortgage commitment in hand, does not mean that the lender will have any leniency if you’re short a unit or two when money is required.

Even if you have all the required sales in place, you need to make sure that you can verify each sale to the satisfaction of the construction loan provider. And when I say each sale, please take me literally. Bank and institutional mortgage lenders are very much by the book in most cases, and will go through the supporting documentation for each sale you pledge as a pre sale to cover the construction covenant.

And while all lenders will have their own requirements and verification process, here are some typical things you can expect to be required. First, the pre sale agreement must be binding upon the buyer via a pre-approved sales agreement with a material deposit held in trust for the committed obligation. The amount of the minimum deposit may also be established by the lender. Second, the sales are going to have to be at arms length in order to avoid any contrived sales that are put together to make the presale quota. Third, block sales for several units will under go a higher level of verification to make sure the sellers intention is to truly purchase multiple units and that sufficient funds are being held to support the claim.

Click Here To Speak Directly To Construction Mortgage Broker Joe Walsh

The post Importance of Presale Verification For Construction Financing first appeared on Ontario Construction Loans And Mortgage Financing.

“If You Are Able To Qualify For Any Type Of Construction Financing, Do You Choose A Construction Mortgage Based On Cost Or Complexity?”

In a world where time is money, someone looking to finance a construction project needs to take that sentiment to heart.

The nature of construction projects is that they come with a certain level of risk where things can go wrong and they can become a time consuming to properly manage.

When it comes to construction mortgage financing, the same things are true. What also is true is that similar to all forms of financing, lower cost, means lower risk. In order for lenders to provide low rates for a construction mortgage, they are going to place requirements and qualifications in place that will assure them of a low risk lending scenario.

This is where the cost trade off for borrowers comes in.

Lower cost construction financing in most cases is going to be more work and more headache to deal with all the terms and conditions and their sometimes  seemingly unpredictable application to your project. There is nothing wrong with low cost deal. In fact I’ve never met anyone that doesn’t prefer it. But it does come with strings and each borrower who can afford to do so needs to decided if the added time and potential other costs that can come with it will be cheaper overall then selecting a construction mortgage with a higher interest rate but greater ease of use or convenience.

Its not uncommon for borrowers to find this hard to understand as after all many times their collective financing experience is based on buying a house, leasing a card, securing a credit line, applying for a credit card, and none of these are all that difficult to get if you have a strong financial profile and good credit.

But getting approved is only the first part. Meeting the conditions of the loan or mortgage are yet another. And when it comes to something like a construction project, the requirements and conditions can be very difficult to meet in some cases.

This is one of the reasons why private mortgage lenders provide a large majority of the construction loans issued on an annual basis across the province of Ontario.

Yes, private mortgages come with higher interest rates, but on average are approved much faster, provide a higher percentage of the construction costs, and have much more predictable and manageable draw schedules.

One form of construction mortgage financing is not necessarily better or worse than another. But to strictly be fixated on the interest rate may cause you to end up with a higher cost construction financing solution once you factor in all related costs, including the opportunity cost of your time.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

The post Construction Mortgages – Cost Versus Complexity first appeared on Ontario Construction Loans And Mortgage Financing.

“Qualifying For Builder Construction Loans Has a Lot To Do With The Exit Strategy For Completed Residential or Commercial Units”

Builder construction loans can be secured by either a commercial builder who plans to resell the completed project or a property owner who plans to be a post construction occupant.

But whether you’re a builder or property owner, the basic process for qualifying for construction financing is largely going to be very similar when we’re talking about building a residential home on a single lot.  The constructon loan provided will evaluate the equity in the property where construction will take place, any investments to be made by the borrower against the construction costs, and the third party appraisal of what the post construction project will be worth. From this assessment, the lender will determine the amount of financing that can be provided against the construction costs, and the amount of investment, if any, that will be required by the borrower prior to issuance of the first draw down against the approved mortgage funds available.

When there are multiple lots involved with a builder application for financing, the qualification process for a construction loan will be based to a large extent on the exit strategy the builder has for selling off completed units.

For instance, if the builder has 10 plus lots to build out, but plans to build only two units at a time, the construction financing would likely be based on the costs for those two individual projects.  When the builder gets the buildings sold, the construction loan account can be paid down and funds will then be available for additional builds.  Each time a lot is sold, it will be released from the mortgage security, so the remaining real estate value will have to be sufficient to cover the equity requirement of the construction loan facility, otherwise the builder will have to provide incremental capital as lots are released.

If the builder planned to build out ten lots at the same time, the lender may require that in addition to the construction loan requirements, that either a take out mortgage be arranged to pay out the construction loan, or that a certain number of presales be in place prior to loan disbursements being made.

Or, much like a property owner coordinating a self build, a commercial builder can arrange a construction loan for an individual lot and unit build that will be retired at the completion of construction by a long term take out mortgage, real estate sale, or inventory loan.

For commercial builders, the larger the construction request, the more the lender is going to focus on 1) builder investment and timing, 2) builder qualifications, and 3) the number of presold units or other relevant exit strategy.

Once a builder gets a number of projects completed while using a particular lender for building construction financing, there is a good chance that the lender’s comfort level will increase which can result in more favorable terms and higher borrowing levels on similar projects.

If you’re a commercial builder or owner working on a self build project and you’re seeking a construction loan for your project, I suggest that you give me a call so I can quickly assess your requirements and provide relevant construction mortgage options that we can go over together.

Commercial builders that develop a relationship with a construction lender over a series of projects may be able to secure better rates and terms over time that one off projects as the volume of repeat business and the predictability of the result will have a value to certain sources of construction financing.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

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