Podcast: Play in new window | Download
Subscribe: RSS | Listen to the Property Developer Podcast
With escalating build costs, delays obtaining materials and softening property values the development sector is once again facing a raft of challenges that are effecting the bottom line. This volatility and uncertainty is having an impact on finance and lending with variations to time and cost quite common.
So how is this affecting the lending markets and what sorts of responses are lenders putting in place to protect themselves and their clients? Let’s discuss all this and more with previous guest Fabian De Marco from Commercial & Construction Capital.
We cover:
– changes in private capital markets
– lenders reviewing /adjusting maximum loan to value ratios
– length of loan terms being reviewed/shortened
– interest rates changing from fixed to variable (not seen in the last 3-4 years)
– some lenders increasing percentage of contingency funds required
– the listed builder on a project is under more scrutiny from lenders than ever before
– feasibilities may no longer stack up so what are developers doing in this situation?
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.
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.
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
Links
C&C Capital – https://www.cccapital.org
Episode Summary
The construction finance process involves identifying the right financing options, setting realistic budgets and timelines, monitoring cash flow, and managing risks. In today’s dynamic market, developers need to stay informed about the latest trends and best practices in construction finance to make the most of their investments.
Financing Options
The first step in the construction finance process is identifying the right financing options. Developers can choose from a variety of financing options, including bank loans, private equity, and mezzanine finance. Each option has its own advantages and disadvantages, and developers need to consider factors such as interest rates, repayment terms, and loan-to-value ratios when choosing the best financing option for their project.
Realistic Budgets and Timelines
Setting realistic budgets and timelines is critical to the success of any construction project. Developers need to create a detailed budget that includes all construction costs, such as labor, materials, and permits, as well as contingency funds for unexpected expenses. It’s also important to establish a realistic timeline for the project and to factor in potential delays and setbacks.
Monitoring Cash Flow
Effective cash flow management is crucial for the success of any construction project. Developers need to closely monitor their cash flow to ensure that they have enough funds to cover all expenses throughout the construction process. This involves keeping track of all project expenses and revenues, forecasting future cash flows, and making adjustments as necessary.
Managing Risks
Managing risks is an important part of the construction finance process. Developers need to identify potential risks, such as construction delays, cost overruns, or changes in market conditions, and create contingency plans to mitigate these risks. It’s also important to work with experienced professionals, such as lawyers and insurance providers, to ensure that all legal and insurance requirements are met.
Dynamic Market
Today’s construction finance market is more dynamic than ever before. Developers need to stay informed about the latest trends and best practices to make the most of their investments. This includes staying up-to-date on changes in interest rates, regulatory requirements, and market conditions. It’s also important to work with experienced professionals who can provide guidance and support throughout the construction finance process.
In conclusion, construction finance is an essential aspect of property development that needs careful planning and execution to ensure the success of the project. The construction finance process involves identifying the right financing options, setting realistic budgets and timelines, monitoring cash flow, and managing risks. In today’s dynamic market, it is more important than ever for developers to stay informed about the latest trends and best practices in construction finance to make the most of their investments. By doing so, they can navigate potential obstacles and capitalize on opportunities to build successful projects that meet their financial goals.
