Condominium development is a lucrative business in Canada’s real estate industry. Developers looking to build or sell condo units need a reliable financing option to make their projects a reality. This is where condominium inventory loans come in.
Condominium inventory loans are a type of commercial real estate financing specifically designed for condo developers. These loans allow developers to borrow money based on the projected sales value of their condo units. This means that developers can secure financing for their projects without putting down a significant amount of cash upfront.
Here are some key aspects of condominium inventory loans that developers need to know:
Loan to Value (LTV) Ratio: LTV ratio is the amount of money a lender is willing to lend against the value of the condo project. Typically, lenders offer a loan to value ratio of up to 75% of the projected sales value of the condo units.
Interest Rates: Condo inventory loans are short-term loans with higher interest rates than traditional mortgages.
Repayment Terms: Condo inventory loans usually have a short repayment term, typically between six months to two years. Developers can opt for interest-only payments during the construction phase and pay off the principal after the units are sold.
Projected Sales Value: The projected sales value of the condo units is a critical factor that determines the loan amount that developers can secure. Lenders usually work with appraisers to determine the projected sales value.
Pre-Sale Requirements: Some lenders may require developers to have a certain number of pre-sales before approving the loan. This is to ensure that the developer has a market for their project.
Developer Experience: Lenders may consider the developer’s experience in the industry before approving the loan. Developers with a proven track record are more likely to secure financing.
Condominium inventory loans can be a viable financing option for developers looking to build or sell condo units. These loans allow developers to secure financing without putting down a significant amount of cash upfront. However, it is essential to work with a reliable lender like GILKO CAPITAL to ensure that the financing terms are favourable and reasonable.
GILKO CAPITAL is a leading commercial mortgage broker in Canada that specializes in providing financing solutions to commercial real estate developers. They can help developers secure the right financing option for their condo projects.
