Benefits of a no pre-sale construction finance
In the early stages of a residential development, project managers often find themselves in a catch22 situation, no construction equals no pre-sales, and no pre-sales equals no capital to pursue construction. Pre-sales finance is designed with this exact purpose in mind, ensuring developers experience no hold-ups or surprises as they prepare for construction.
Pre-sale construction finance starts with an assessment of the project and the total development cost (TDC). During assessment, the total eventual sale value will help determine the project’s gross realisation value (GRV). Together, these values are used as guidelines to determine the funding required, along with understanding your critical timelines to ensure your project is moving full steam ahead.
To learn more about no pre-sale construction finance, get in touch with our friendly team today.
No pre-sales construction finance assessments
With no pre-sales construction finance, an assessment of the development will be carried out and the cost of completion estimated. This is the total development cost (TDC) of the project. During the assessment, the total eventual sale value will be estimated. This is the project’s gross realisation value (GRV). Together, these values will be used as guidelines for the maximum borrowing potential.
Using TDC and GRV to determine funding amount
A no pre-sales construction finance solution is based on either the total development cost (TDC) or on the gross realisation value (GRV). The developer may borrow a higher percentage of the TDC if this method is used to calculate funding, but the GRV value will be higher. The GRV method of calculation will provide the borrower with more funds upfront, but will be subject to a higher interest rate.
Applications are assessed on a case by case basis, and our team will work with you to give you, the developer the best chance of getting funding. There may however, be other factors and requirements in addition to those listed above, relating to development approvals on the land used for the construction project.
To learn more about no pre-sale construction finance and to discover if it is right for your project, get in touch with our team today.