Did you know that the residential real estate development market is worth around $150 billion in the United States? It isn’t cheap to get started with construction projects. It is important that you know how to manage finances in order to have a successful real estate project.
Many real estate developers opt to get financial help through real estate development financing. But what is real estate development financing and how will it benefit you on your next real estate project? These are great questions and the good news is that you’ve come to the perfect place to get answers.
Keep reading this article for some helpful financial tips and to grow your knowledge of development financing.
What Is Development Financing for Construction Projects?
Real estate development and construction projects take a number of different forms. This could mean tearing down an older building in a prime spot in an urban area or it could mean clearing land out in the country for a new subdivision. This tends to involve large amounts of work and heavy equipment and requires some financial help from a lender.
There are four different types of loans that you should consider for your construction project. The first is called an acquisition loan and it is used in the real estate market to purchase the land or buildings that you want to add to your portfolio.
There are also development loans. These loans are used to improve the land or the buildings. This is useful if you buy land that needs to get leveled in order to put homes on it and add water and gas lines.
There are some loans that combine the acquisition and development aspects into one loan. These are referred to as A&D loans. This is a popular type of property development finance if your area of expertise is taking undeveloped land and creating large neighborhoods or subdivisions.
The last type of development financing to know about is the construction loan. This is an important loan if you need financial help with building structures or homes on the land that you’ve purchased. This is different from the previously mentioned loans because you will get monthly installments from the lender rather than one lump sum of money.
What Sources Should You Use?
There are certain sources that you should seek out when you’re in need of a development loan for your next construction project. A good place to start is with some local banks in your area. They’ll have a clear understanding of the real estate market in your area and can help you get the finances you need in order to get started.
This is also a good source for construction loans because they need more significant levels of administration. If banks don’t work then you should consider going with a credit union or a finance company.
Get a Head Start On Your Next Construction Projects
The biggest hurdle that you need to clear in order to start on your future construction projects is typically financing. There are sources of financial help that you should consider using for your next real estate project. They’ll provide the money you need to land acquisition as well as building and development.
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