History and development of the quiet town Hoquiam Castle
Real estate developers are very knowledgeable about the usual 15-year and 30-year mortgage. Long-term real estate funding, as well as line of credit and mortgage financing, worked in the past and continues to work. But really, these types of financing have been used for renovation or reconstruction, not really for real estate development projects like hotel real estate development.
You must understand the difference between a new development project to be constructed and an existing one to be refurbished. Then too, you must understand the difference between mortgage financing and real estate development financing. You might wonder about the importance of telling the difference between two seemingly the same things. Perhaps you have been interchanging the two terms all your life. Or perhaps, you never thought that development project is an entirely different thing from a renovation project. Well, you are about to find out some interesting details.
When you want to buy and own a land or building for the long-term, what you need is a long-term mortgage to finance your plan. Mortgage is great for buying land, apartment, house and whatever property you want to own for many years to come. However, when you want to set out for hotel real estate development, which involves buying a land and constructing structures on it, you need real estate development financing.
After completion of the project, say a hotel real estate development, the entire project is sold and the loan is paid. However, you may retain part-ownership of the project by getting a long-term mortgage loan for that particular purpose, but not until the project is entirely sold and the development loan fully paid.
The development project should generate a substantial profit. Ideally, you should have it realized in the form of equity, not cash, to stave off hefty taxations. However, the success of this tactic depends on taxation laws governing your locality. You should also maintain your mortgage loan at a manageable level; keep it at minimum and make regular repayments. That’s the only way to make sure you retain ownership of the project you so dearly labored for.
By now you should understand that real estate development is one thing and real estate renovation is another. But more importantly, you should understand that mortgage financing isn’t the best funding for real estate development projects.
With real estate development financing, you are not merely asking a financial institution to provide you funds for purchasing any property. You are asking them to help you fund a whole project of buying land and constructing infrastructure. To get approval for the development project loan, you need to have your development plans, costing, and feasibility study approved.
Many real estate developers make the mistake of finding and purchasing land first, and applying for mortgage financing later for the building construction. Sadly, they are likely to end up compelled to cancel the mortgage and acquire the right funds for a hotel real estate development or whatever development project they are planning to do. In the process, they waste precious time and money.
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