Condo Construction Loan


A condo construction loan can be the answer for those desiring to pursue new construction, rehab existing condominiums or build new condo office units. Depending on the market and how well condos are selling, condo construction loan lenders can provide any amount of money dependent upon the borrowers credit rating and other factors. Whether the unit will be for commercial or private use, there will be a lender out there ready and waiting to provide services for the builder or rehabber. In general, lenders want to see that the borrower shows experience in the industry, has capital, has done the homework of getting the necessary permits put into place, has considered carefully the viability of the project and has the sales and marketing support to ensure the property is lucrative after building has been completed.
Many offering a condo construction loan will not likely make a deal for less than one million dollars. Also, the property should be well situated to have adequate access to interstates and main avenues of traffic. Most building loans have interest that must be paid whenever a draw is requested, and in general, that money can be rolled into the total amount of money requested to cover these payments. Also, there will inevitably be changes made to the construction plans that were not foreseen, and so this will cause change orders to occur. In order to ensure these costs are covered, a contingency fee is added to the amount requested, usually up to 10% of the total amount of money requested. The final mortgage amount will be based on the value of the property after all construction has been completed, and is referred to as the equity. Of course, these loans will usually be higher for a new building than for a property that has already been acquired.

Builders interested in obtaining a condo construction loan must make sure that all the plans are completed and ready to go, that the specifications are evident, and have information about who will do the work. Lenders want to be comfortable knowing that the company doing the building is financially solvent so that all the work will be completed without difficulty. Also, the condo construction loan lender may engage someone to provide oversight of the project who will report back to them regarding the progression of the work. Should the project not be a new building, but rather rehabbing of existing condominiums or apartments, then there are lending instruments available referred to as condominium conversion loans. These are based on the potential amount of rental income that can be extracted from the units from all types of leases. The idea is to upgrade the property to the point that the income is larger after the improvements have been made than if no improvements were made. In many cases, the units are sold off to pay down the mortgage.

There is another type of condo construction loan that is provided to those who own property and plan to build condominiums on it, but sell the land tracts in order to have enough money to put down before actual construction commences. Many times banks will not loan the building money until there is certainty that people are interested in buying, and this is why a certain number of tracts need to be sold before loan negotiation can begin. Those who purchase condos prior to construction will discover that the price of these dwellings will be less than if purchased after the building has been completed. Purchasers should be sure to do the homework in ensuring the reservation agreements are carefully prepared, with the understanding that there is a certain amount of time to decide to back out of the deal if necessary. Should the deal go forward, then a down payment is made which will be a certain amount of the full purchase price and a contract signed. After the building has been completed, then a Certificate of Occupancy will be provided prior to closing.

When investigating a condo construction loan, it may also be a good idea to find out about the condo community after all the units have been built. There may be a condominium association fee that must be paid on a monthly or yearly basis to provide for upkeep of the community. Also, do not let the contractor try to increase the price of the condo to the value it will be after the construction is completed. The price should be lower. Do not forget to negotiate that all important interest rate to get the very best terms for the loan.

The aging of America has brought the condominium into play as a viable real estate commodity for the senior. Those over the age of fifty look forward to the continued pride and enjoyment of owning their place of residence but want to shun the responsibility of maintenance and upkeep, kind of like wanting the dog that licks your face and cuddles with you but having to walk him every day isn’t required. Because cleaning the gutters and shoveling the snow are things of the past condos continue to rise in popularity and the person who not only knows how to get a condo construction loan but also knows how to use it to make large profits will be not looking for work any time soon. But in the midst of making money and having few household chores to do with condominium living Jesus tells all people something profound. “I am the way, the truth and the life; no man cometh unto the Father but by me.” (John 14:6)