Business Property Finance

Financing of commercial real estate

Comprehension of real estate financing Real estate finance is a specialty and you will find that different creditors concentrate on different kinds of real estate finance. South Africa's real estate financing markets are quite well advanced. Until you have initialed memoranda of understanding to take place from bluechip customers, you could struggle to find funding for this kind of property.

A security is still needed, however, as the overall value of the loans (loans, interest and management fees) is higher than the value of the property. You will always have to find extra funds for the down payment and these can range from 30% to 50% according to the benefits of each credit request.

Selling real estate that can only be used for one thing, such as a cinema, youth club, or fitness center, is more complicated. This property needs to be adapted to business requirements and is therefore more complex to dispose of. Often in this case, creditors are expecting you to make a much bigger down payment.

Generally, real estate financing works like a forward credit, only the maturity is a 10 year limit. Immovable property is owned by the creditor until the credit is fully repaid and only then is the certificate of ownership issued on behalf of your company. Depending on the property and its value, the amount of the security depends on the property.

Creditors will review your individual and business solvency assessments, and if one of them is bad, you will struggle to increase funding.

Real estate financing explains | Talk Business

There are many ways to get this kind of secure credit, from the need for money to set up a business, to debt repayment, to property improvement. It is interesting to note that there are no longer only banking and "traditional" creditors, as in previous years, but more and more alternate and non-bank creditors who offer these financing agreements, provided that their claim and qualification requirements are fulfilled by the claimant.

However, these financing agreements are almost exclusively for investments and short-term investments. For those who want to use a property or a property redevelopment as a profit and capital expenditure resource, there are many possibilities. Different forms of real estate finance should be examined in detail to ensure that you take out the deal and layout that best suits your particular needs and real estate aspirations. However, the most important thing is to make sure that you get the right financing for the right property.

Interim credits - These credits are a short-term financing agreement that enables the borrower to close the real estate purchase deficiency. However, interim credits have higher interest charges than, for example, a mortgages. Financing for development and redevelopment - This financing is appropriate for property development companies and those wishing to invest in real estate.

The main advantage of this financing is that although it has interest rates higher than the "normal" interest rates, the funds are used to enhance a property and its value and raise what will be paid off over the years. Some renovations and enhancements, which can add more than 20% to the value of a property, allow the real estate developer to make a decent return in a timely manner.

Moreover, with many of the "big names" creditors this type of loan is no longer as universal as before, perhaps as a consequence of a somewhat vacillating real estate markets; there has been a strong rise in the number of other creditors who have bridged this gap by providing this type of financing.

Self- built finance - The financing of self built finance is different from other types of financing for developments. This means that the way the creditor assesses the credit is much more similar to a regular hypothec. Furthermore, this financing is associated with a lower level of exposure for the creditors and thus for the borrowers. Since the construction of real estate takes place in several phases, the resources are not approved in one go, but in several steps as a flat-rate amount.

Mehr zum Thema