Private Lending Resources
5 Tips on Financing a Real Estate Development Project
Are you a real estate developer or interested in becoming one? Are you looking for a private loan to flip a home?
Especially in today’s variable market, if you find a property with investment potential, it’s important to move on it as soon as possible. One way to ensure speed to close is to talk with lenders beforehand about your real estate development plan so you have a reliable capital partner when you’re ready to make an offer.
If you’re seeking funding that could reduce equity raise requirements and close in less than 30 days, you’ll want to contact a private money lender for real estate.
Real estate hard money lending has various titles: private money lenders, commercial real estate lending, investment real estate lending, investor-to-investor private lending, direct private moneylender, etc. If you’re looking for a lender with a partnership mindset in a real estate project, this is what you’re looking for.
RoseRock, a private lender for real estate investors in Texas, is such a company. They work in residential development and commercial development in Texas and select states across the U.S.
RoseRock is an active partner with their investors. They’re a private lending company that seeks to build a relationship with their investors and personally review all loan opportunities with a goal of creating custom loan solutions that will benefit all parties with transparency and consistency throughout the lending process.
To help with that process, here are 5 tips on Financing a Real Estate Development Project:
1. Do Your Research
Do thorough due diligence and fully research your real estate project to help secure funding for a real estate development plan. Make sure the details are concrete and verified through market research before making a loan request. It’s guaranteed the lender will do their research, so it’s important you’ve been rigorous when it comes to knowing all aspects of the investment project you’re attempting to secure a hard money real estate loan for.
2. Prepare a Professional Portfolio
What’s your background in successful development projects? Do you have an up-to-date professional CV or resume? Proving you’re a viable candidate for a loan can help you gain approval from a private lender. Showing past experience and credibility proves you’re a worthwhile investment. Whether you’re experienced or not, it’s important to be prepared for questions from your investor. If it’s your first time attempting to secure a private real estate loan for a real estate development plan, make sure you can show your potential investors your project is viable and you have a team in place to bring experience to the project.
3. Organize Your Assets
Have your assets in good order. While private lenders may not have as many underwriting requirements as a bank or other traditional lending institution, they still want to know you’re in a good financial position before offering a term sheet. It’s important you can show your lenders that they’re working with a solid collaborator who understands the value of communication and teamwork. When it comes to private lending, transparency plays a big role—on both sides of the table. Acquiring funding for a real estate development project means you have to prove you’re accountable with and for the capital being invested in the project.
4. Calculate the Costs
Compile a well-researched and documented breakdown of what the estimated development costs, projected income and expenses, and profitability for the project will be. Real estate investment private lending requires a well-researched cost analysis in order to provide funding. Everything from sales costs to construction expenses, to fees for permits and development applications, to the unexpected. Costs will vary depending on the scope of the project, and it’s important to have a realistic handle on what expenses will be accrued throughout the project.
5. Write an Executive Summary
Along with the cost calculation, create an executive summary —similar to a business plan. This provides a detailed summary of not only the financing but important aspects of a building project, such as zoning, site description, timelines, and projected sales figures. It’s important—as with any business plan—to be as detailed as possible with your information. This shows to your prospective lender that you’ve done your due diligence and thoroughly understand the venture, as well as the costs.
A last thought: As a trusted, experienced private lending company, RoseRock advises that, as the project gets underway, it’s important to keep up with the paper trail and expenditures so that when you and your lender come together for a progress report, you’re ready with whatever information they require.
Securing financing for a real estate development plan is the beginning of a profitable partnership between you and your real estate investment private lender. Contact RoseRock today and start planning your next successful real estate acquisition.