Subscribe: RSS | Listen to the Property Developer Podcast

Private capital funding was somewhat of an exotic animal a few years ago for most developers but has become quite mainstream in recent years, with more developers using it to fund their projects as bank lending has tightened. So we dig in to find out the best way to access non-bank lending.

At the time of this recording, Australia is in a kind of lock down due to the corona virus so life has changed quite a bit for many of us. We are spending more time at home and there is a huge amount of uncertainty floating around. So I hope you are well, and coping as best you can. I will be bringing you some episodes about how you can use this period as an opportunity to set yourself up for growth, so keep an ear out for them in coming weeks, including a discussion with past guest Byron Sakha about leading through adversity. In the meantime, perhaps you have a bit more time to listen to podcasts, read books and work on those tasks you have been putting off for ages…

Before we get to today’s guest, don’t forget we have the mentoring program available to help you get started in property developing, if you’ve always wanted to become a developer but don’t know where to start, or have fears about getting it wrong, then the program is an ideal way to learn the ropes and have someone hold your hand along the way. Email me, justin@propertydeveloperpodcast.com to find out more.

Property Development Training

If you are interested in learning the fundamentals of property development, in your own time and at your own pace, then be sure to head over to www.propertydevelopertraining.com and take a look. I take you step by step through the development process so you know exactly what is needed to find a site, run a feasibility and complete a small scale property development, be that a duplex or 3 or 4 unit site. The training includes a bonus program called Taking It To The Next Level for people who may want to go into developing full-time, along with another bonus course called Raising Capital which covers how to raise money for your projects.

So head over to propertydevelopertraining.com and take a look… I would love to see you on the inside…

Property Developer Quiz

Keen to find out how ready you might be to become a developer? Then take the Property Developer Quiz (https://www.propertydevelopertraining.com/quiz) and get a sense of where you are at…

Become a Million Dollar Property Developer

Grab my book Become a Million Dollar Property Developer about my journey into property development. This book is ideal for anyone who intends to get into small-scale property development and wants an insider’s guide to successfully obtaining wealth, fulfilment, and glory.

In this book, Justin will share how he succeeded in delivering a 20-townhouse project on his first property development project and what he learned along the way.

Many people have a dream of becoming a property developer. They aspire to build properties, grow portfolios, and amass great wealth. However, many people often struggle with making the leap into property development.

This book has the answers for how you can make the leap into property development. Grab your copy now.

Social Connection

Property Developer Podcast Facebook – https://www.facebook.com/propertydeveloperpodcast
Property Developer Podcast Instagram – https://www.instagram.com/property_developer_podcast/
Property Developer Podcast LinkedIn – https://www.linkedin.com/company/property-developer-podcast

Speed to market can often off set the higher costs of non-bank funding.

Okay, on to today’s guest, commercial finance specialist Fabian De Marco from Commercial & Construction Capital. We are talking all things private lending. With the growth in the sector over the past few years, there are many new players in the capital markets and lots of developers are turning to a source of finance that just a few years ago was more of an exotic species than mainstream. But all that has changed as lending restrictions have kicked in and banks have reduced their exposures and risk appetites.

Fabian is a seasoned debt placement specialist with nineteen years of expertise in property development finance, including land and construction finance through senior debt, mezzanine debt, preferred equity and joint venture funding. Fabian also has experience in funds management, financial markets and retail banking, having held senior roles with well known banks, hedge funds and money managers.

We talk about the pros and cons of private funding, some of the pitfalls to look out for and when is the best time to use private capital, which may grow even more over the coming years depending on what happens after the corona virus has passed… so you might be considering this funding avenue for your next project… we haven’t had a private capital conversation on the show before so I was looking forward to hearing about how it can work for you…

Lessons for Real Estate Developers

Okay, there you go, an interesting conversation about alternative ways to get your next project funded. It has been challenging getting pre sales in the past few years, but things were improving until the corona virus struck and the world changed, so now we are back in a tough environment for pre sales so private capital may become even more helpful over the coming years… so here’s three things I took away from my discussion with Fabian.

1. Look to work with private lenders who have a good track record

You want to be sure that you are partnering with a funder that has a good track record on seeing projects through. In the same way that a builder going bust during construction causes major headaches, a lender becoming insolvent or disappearing during construction would also be a massive problem. So make sure they have enough liquidity and experience to complete the project. You need to do your own due diligence on who you may be working with.

2. Determine if your property development project would benefit from private capital

While the funding costs may be higher when using non-bank capital, the higher cost may be offset by speed to market. Instead of waiting around for an extra 12 months to make pre-sales, you could be out of the ground and well on your way to completion, which means you can cash out sooner and work on the next project. So your velocity of projects could increase through paying higher costs but your overall return is better as you turn projects over faster.

3. Work with someone who has good experience in non-bank lending

As Fabian said, the non-bank market is largely unregulated so you are far more exposed if things go wrong, so it would be prudent to work with someone that has experience working with trusted groups and can advise you on the best course to take. Trying to work directly with unknown groups could be a very risky approach.

Alright, I hope you enjoyed that finance chat with Fabian Demarco. If you want to hear more construction finance discussions, go back and take a listen to episode 56 where I talk with the guys from Holden Capital about how you can get yourself positioned for a tight lending market. They had some great advice for how to be proactive during times of uncertainty. There is plenty of useful tips and advice in that episode so go back to 56 of the Property Developer Podcast. https://propertydeveloperpodcast.com/2019/02/19/56-money-markets-construction-funding-and-property-development-finance-outlook-for-2019/

Okay, don’t forget if you are interested in learning how to develop property then email me about the property developing mentoring program that is available to help you get started. There’s nothing like a guiding hand to show you the best way when you are starting out, so email Justin@propertydeveloperpodcast.com and I will send you some further information.

You can also catch me on Insta and Facebook for all my latest project pics & videos, industry news and other fun stuff. You can also post a comment on iTunes if you are enjoying the show, and of course all the past episodes of the show can be found at www.propertydeveloperpodcast.com

So, until next time, may all your projects get funding quickly so you can get started sooner…

Links

Commercial & Construction Capital – https://www.cccapital.org