Underwriting Transition from Construction Loan to Permanent Loan
When you are underwriting a development deal, lets say mixed use ground up, how would you underwrite the transition to your permanent debt? Do you immediately lever the project with a permanent loan when you hit stabilization and take the proceeds (since a stabilized permanent loan usually much higher than your initial construction loan) and distribute that to investors? Or do you just extend your construction loan until you're ready to sell? I suppose this question depends on hold period, so one example would be with a 5 year hold and another with a 10 year hold.
Thank you brilliant monkeys for your ever helpful wisdom and knowledge. (Seriously)
Hi CRESouth, whoops, looks like nobody chimed in here.... maybe one of these discussions below is relevant:
If those topics were completely useless, don't blame me, blame my programmers...
Bump
It depends on the deal and situation. If your hold period is to sell when complete, you won’t show a refi, if you plan to Hold post completion, you’ll probably show a refi as your construction loan will be about due at the time of completion. Unless you plan to use an extension option on your construction loan.
Agree with pudding. Depends on timing. If you're selling at CO, then you'd assume a sale and pay off the construction. Otherwise, if you have a 10+ year time horizon/hold period, as an example, you'd refi to a permanent loan with a hopeful cash out equity distribution.
Voluptas laborum in veniam quam necessitatibus non. Numquam atque autem dignissimos earum quis perferendis. Molestiae voluptate sunt et ipsam quod. Ea eveniet quasi est voluptatum id in. Ipsam temporibus doloribus eveniet pariatur dolore velit. Ut molestias consequatur suscipit tempore ab sapiente impedit officiis.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...