Real estate funding and key fundamentals of investing in the Australian residential property market are where, what and when to buy. These fundamentals are driven by macro and micro indicators.
Macro indicators show where to invest so you can focus your attention on area’s population growth, public and private infrastructure spending, employment, supply and demand and economic health, etc…
Micro indicators show what to invest in determining property’s value, quality, design, amenities, access to transportation and rental income, etc…
Real estate funding as an investor, purchaser of property or property developer, at some point in your investing you’ll run out of cash. This becomes a into problems with financing as you start to take on bigger deals or more deals at once.
Real estate funding as you take your investing to the next level and leverage finance with the banks, you may be hit with the reality that you’ve reached a limit with your borrowing.
This can stop many investors dead in their tracks, although it need not be a reason for you to sit in the corner and do nothing until you’ve topped up your cash reserves, right?
Real estate funding is the simple answer where you ultimately tap into a world of unlimited other people’s money (OPM) to help you fund projects.
Real estate funding and the problems of inadequate comprehensive data: An executive summary is just an introduction to the project, not a comprehensive outline of the project.
A full detailed business plan which includes an executive summary, stabilized pro-forma income/expense data, complete development / construction costs data, sources and use of real estate funding data with viable exit strategy is required for review in order to determine project acceptability.
Real estate funding, no collateral and project financing implications?
All project submissions must demonstrate control of significant physical and/or marketable assets to initially collateralize funding structure as a key component to attracting investment capital (bridge, mezzanine or equity) in context to collateral offered by the project principals, which secures the return of at least the invested principal amount.
This can be in the form of entitled and permitted market value of property or other owned real estate assets currently appraised in excess of investment amount or in the form of owned securities with a net future value equal to or greater than investment amount, ensuring the return of principal at term…
Real estate funding in context to insufficient owner equity and liquidity. Project owner’s should be able to demonstrate equity currently invested into the project and documented by the following:
(a) Documented control of property/land parcel
(b) Completed and approved site engineering
(c) Completed and approved architectural plans
(d) Documented municipal, state and federal permits, approvals for design, zoning and environmental
(e) Recent MAI full project appraisal/business valuation with feasibility, project financing, market studies
(f) Professionally presented business plan including pro-forma financial data and product marketing plan
(g) Experienced and dedicated management and advisory team comprised of industry specific professionals…
In addition, project ownership must provide evidence of ample liquidity in order to establish a valid capacity to compensate for the possibility of insufficient future cash flow should pro-forma projections not be met.
Real estate funding and lack of investor seed capital? This is the developers and project entities largest hurdle because without seed capital, none of the above can occur.
Real estate funding …it is crucial for you, the owner(s) of the project to find an investor or group of investors which believes in your project and has the available cash and/or assets to put up in order to back the project financially.
The major issues with any investor or group of investors are safety of their principal, the projected return on investment in a relatively short time period, along with a percentage of future project profits.
As a first step, seed capital allows the developer to cover initial land and development costs (deposits, contracts, options, approvals, engineering, design, studies, appraisals, etc) which include completion of the documentation package required to prove the project bankable and qualify for applicable bridge, mezzanine and/or private equity capital leveraged by permanent financing commitments.
Real estate funding combined with opportunity and value guide you towards when to invest. Are you wanting to fast track your way into your first property development because you don’t want to waste years in costly trial and error?
Research, knowledge and education allows you to confidently mitigate risks and decide what’s best for you, because you’ve analysed all the data factors above and matched these funding criterias to your own investment property goals…does that make sense?
Real Estate Funding