Condo Development Bridge Loan Financing
“A Condo Development Bridge Loan Financing Solution May Be Required At Times To Keep
The Project On Track”
It’s not uncommon for a developer to come to us looking for a condo development bridge loan for their residential property and not be able to qualify with a conventional financing program due to the level of sales or pre-sales that have been made to date.
Most bank or institutional lenders will require unit sales of anywhere from 70% to 80% of total available condo units before they are going to be prepared to finance a condo development project.
In many cases, the client falls short of this mark at the point where more capital is required to keep the project moving forward resulting in key crossroad for the developer.
If more funds cannot be secured by the condo project, everything can start to unravel with pre-sales actually going the other way if too much time with no progress taking place.
And while getting another investor could be a workable strategy, its not always easy to locate someone prepared to invest money right now that is comfortable with the project and where its at. Plus being in a position of requiring capital is a bad negotiating position which could see the developer giving away a good chunk of his profit.
So a potential solution to this challenge is to get a construction bridge loan in place to provide incremental funds for the project, keep the work moving forward, and provide time to get the pre sales to a level where the preferred condo construction and development loan can be secured.
This strategy can work if there is equity in the property that can be leveraged to secure an additional loan. Its not uncommon that a development property will appreciate after purchase once the planning has been approved and some of the site work completed. Even in situations where there is a first mortgage in place, a bridge loan can be secured in a second mortgage position. This will be at a slightly higher rate than a first position bridge loan, but compared to the costs associated with the project slowing down or stalling, the incremental cost is going to be extremely minimal in most cases.
Plus, remember that this is a bridge loan and will only be in place for the time it takes to qualify for a larger condo construction development mortgage which will occur when pre sales get to the right level.
Bridge lenders are interested in these types of situations because the project is far enough along that it already has pre-sales and there is a clear path to getting to a sales level that will allow for the project refinancing that will pay out the bridge lending source.
If you have a condo development project that is facing this challenge, or some other challenge with respect to securing incremental financing, I suggest that you give me a call so we can quickly go over your situation and requirements and provide relevant options for your consideration.