Many people think that real estate is reserved for only the filthy rich who have wads of cash stashed in their bank account. However, nothing can be farther from the truth. The existence of real estate development loans proves that lack of enough money should not cut your real estate investment dreams.
Investors put into play various strategies for land development financing even when they don’t have the money. The point is: developing land for real estate is not all about finding a good piece of land to buy. It involves plans for loan requests and calculations of all costs for the project including the development and construction.
Getting the Best Out Of Your Real Estate Investment
A lot of money is involved in buying and developing land. Since investment in real estate is a business like any other, you should always be realistic when calculating the amount of expected returns before taking up a loan for purchasing land. Therefore, you should be able to calculate the exact number of apartments, flats, units or condos the land will accommodate before going for it. In addition, you should have enough knowledge on the operations of real estate financing.
There are various real estate development financing options offered by financial institutions operating with different lines of financial products. It is not easy to pick just the right one for your investment. Remember, lending institutions may appear different but they all have a common goal: making as much profit as possible with minimal risks. Since your goal too is making profit, you should invest both time and resources to learn the ropes and ensure that you get only the most suitable financing package.
Before handing in your Development Finance Application to the lending institution, you should have the relevant information at your fingertips. Among other things, you should have detailed information on the lending policies, the department you will be working with, and the person who will handle your loan request. Above all, you should ensure that the application is short and clear and contain just what the lender needs. This ensures that you don’t have to answer too many questions from the lender and helps avoid delays in the processing of the loan.
Buying the Property
There are several important factors that should never be forgotten when it comes to actual buying of the land. They include accessibility to the site for all the final owners of the houses, the drainage system, and the boundaries. You may need to have an agreement with the local authorities charged with the responsibility of road and highways construction if you plan to develop the land into a large number of plots. This is where your financial institution comes in since the agreement will have to have bond backing for assurance that any later work on the road will be paid for in case you go bankrupt.
What You Need:
When you're satisfied with the land you are planning to develop after settling for one of the loans for real estate investors, you should contact a solicitor who will help you get legal documents containing the information about the property. They include a contract, a copy of the title deeds, and forms containing property information as well as fixtures, fittings and contents. The solicitor will further search for information on the local authority, water board, and mining by compiling a list of questions about the property that are then sent to the concerned authorities.
Remember, having a solicitor with you is of utmost importance since you may not notice some problems with the property. It is advisable to let him or her have a good look at the development site just in case there is an important issue that needs to be pointed out. Additionally, you can accept the contract conditionally after you have received a planning consent. You can always pull out of the contract in the event of refusal of a planning consent or if unfavorable conditions are imposed on you by the authorities.
Sealing the Deal
Once everyone is satisfied, you and the seller will agree on a completion date. The signed contracts will then be exchanged and the remainder of the payment and title deeds as well as documents involved in the transfer surrendered. Keep in mind that it is not easy to withdraw from the contract once the exchange has been made since you’ll have to pay heavily for it unless some conditions had been agreed on.
Keep in mind that the property could be under mortgage. In that case, the transfer should not be completed until an agreement on its payment has been made. In addition, it should be in written form.
Bottom Line
While some investors have learnt how to finance real estate development site the hard way, you have easily gained a good idea on what it is all about. Remember that investment in real estate can make or break you financially. Nevertheless, there should be no deterrence to making a good fortune out of it as long as you have a well thought-out financing strategy.
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