Development Finance For Auckland Commercial Real Estate Projects
Securing the funds to finance Auckland commercial real estate development is often a major hurdle. With the recent housing collapse still fresh on the minds of the lenders and defaults reaching unprecedented rates, lenders around the country had already tightened their lending requirements. This had made borrowing quite difficult for even some of the top players in the commercial real estate market. This article will highlight some of the most important tips in finding the required development finance for your Auckland commercial real estate project.
The first place to look for commercial real estate development finance is your regular bank. They will have specialist departments for business banking and property development. However, the main banks are famously risk-averse and so the rules and regulations of larger banks are likely to be tough. So it is quite probable that your bank will not help you but if you have some assets held with them such as your home or a business, then you might be able to use this as collateral for the property development financing you need.
The first thing the bank will want to see will be our business plan. This should be carefully prepared, in fact, even the tiniest detail should be effectively addressed in it. Instead of presenting a general plan to the bank, be sure to make your presentation as specific as possible. Lenders are far more impressed with the details of a specific plan than a general plan. They will want to know how you will service the debt in terms of income you expect to receive and be sure to include the sources of that revenue plus sound reasons for your expectations. They will also want to know your exit strategy or more importantly, your exit from their loan i.e. how will they get their money back. That is their primary motive – repaying the loan.
You also need to project confidence to the bank. The bank will not like to lend money to anyone who is not confident of what she or she is talking about. Even though you may be confident inside, it will not do any good unless you are able to convince the bank about it. It is often said that bankers can tell by looking in the eyes of potential borrowers whether they will be successful or not. The best way to exude confidence through your presentation is through experience. After a few attempts, you will learn about the questions that are asked by the bank and how to answer them effectively. This will help you to speak confidently and clearly without any doubt in your mind. Doubts usually arises due to inexperience for that matter.
Looking professional when showing up at the bank is extremely important, in order to gain the confidence of the bank. Even though it may look shallow, it is quite true that the lender will likely consider every tiny detail about you before they decide to lend. Showing up in an Armani suit may be a little expensive but you should definitely look professional.
If you are still unable to obtain the necessary finance due to whatever reason, join with a partner. This would definitely increase your odds as the bank will now consider two incomes, two personal guarantees and less risk. Such a move can work in your favour in obtaining the required finances for your real estate project.
Auckland development finance
A more likely source of commercial property development finance are secondary banks and private lenders. These companies exist for funding commercial projects like property development. It is their business unlike the main banks who are for the most part money transaction processing entities.
The private finance providers are not well known so you probably need to go to an Auckland development finance company who have contacts with these funding sources. They also have experience in these types of transactions and understand the challenges property developers face therefore they can be more accommodating to the needs of borrowers. You will still need a sound business plan, with debt servicing and a loan repayment plan but these finance companies only work with commercial finance projects. They may even be able to suggest amendments to your strategy to help you save money, reduce personal risk and increase the profitability of your development scheme. They might even be able to introduce you to other people who can help with your commercial development plan.
Future commercial real estate development finance
Once you have obtained the necessary finances from your lender, managing the first few developments should be done with utmost care. The proper handling of the first few properties will definitely help you to borrow more money from the bank in the future. If you succeed here, the bank will definitely come after you asking when you will be borrowing again. This is why you need to play your cards with extreme care when managing your real estate projects.
Summary – commercial real estate development finance
Finance in general but commercial property development finance in particular is a complex business. It will pay you dividends to work with professionals who know the industry since they can not only arrange development funding but they also have contacts for other services you might need. The aforementioned is only a brief overview into the hugely complicated commercial and development finance market. Talk to experts like Global Pacific Finance Ltd for example, about how to get development finance for your Auckland commercial real estate project.