realestatefinancing

Definition Of Real Estate Financing

Real estate financing concerns the financial means implemented for the realization of a real estate project and my review here.

It can come from several different sources:

Personal contribution: it can be savings, the result of an investment or an investment, proceeds from the resale of movable or real estate, donation, etc. The contribution is the availability of money that comes from the buyer's own heritage.

Real estate credit: it is a bank loan allocated to the acquisition of real estate. The borrower is required to repay it with payment of interest and fees.

Aid in the form of a loan: these are loans at a cheaper rate implemented as part of the housing access policy.

Family solidarity: loan from family members. The family loan must be repaid but it is at very low rates or even free.

Help for low-income families: the family allowance fund also offers aid for low-income households. The budget necessary for real estate financing includes the price of the property, the costs of various files, and the costs of the real estate loan.

The advantages of a real estate financing plan

Having a clear and costed financing plan offers many advantages. This document will, first of all, allow credit institutions to have better readability of the proposed financing project.

For the borrower, this financing document will constitute the cornerstone of a solid and viable financing file.

To increase the chances of obtaining a mortgage, the financing plan should ideally show that the borrower intends to inject a sufficient personal contribution to the real estate project.

The greater the personal contribution, the more the credit institution will grant a loan at a low-interest rate. In short, the financing plan makes it possible to build a solid and attractive financing case for credit institutions.

What is the real estate financing plan made of?

As a balance sheet of the financial situation, the financing plan must show on the one hand the balance sheet of financial contributions and other potential aid, and on the other hand the estimated amount of the real estate investment.

In terms of resources, the financing plan shows:

• Potential aid: borrowing from the family, for example
• Products related to the possible sale of goods (real or movable)
• Bank credit: namely the amount of the mortgage required

In terms of needs, in other words, future expenditure, the financing plan shows:

• The evaluation of the investment: purchase price, possible works, etc.
• Miscellaneous costs related to the investment such as notary fees

Different types of commercial real estate

From the above definition, it is easy to understand that there are two kinds of business real estate: professional real estate and non-professional real estate.

Real Estate professional nature

These are buildings and other constructions that are used to carry out the professional activity of the company, within the framework of its corporate purpose. These are work buildings or buildings for housing staff members that are owned by the company. Here are a few examples:

• Office
• commercial premises
• Warehouse
• doctor's office

property unprofessional use buildings

This category brings together all the real estate assets which are the property of the company, but which are not to be entered in the first category. We think in particular of apartments acquired to house the manager or certain employees.

What are the different possible funding methods?

Like professional equipment, you can finance your business property by equity, normal credit, or leasing, taking into account the advantages and disadvantages of each as well as the opportunity to use each of them. depending on the type of business property.

Equity

Using the company's own financial resources to finance its corporate real estate is the most common form, although it is often supplemented by a loan. This equity financing generally consists of a contribution in kind.

The Classic real estate loan

It is often a substantial investment and does not necessarily bring future financial profitability. Indeed in many cases, real estate investment makes it possible to save money, promote an image, or constitute a guarantee for creditors or investors. Thus, bankers fear this kind of competition, since the investment in itself does not produce a return of financial flows. However, the latter can be guaranteed by a mortgage, which will facilitate financing.

Real estate leasing

Real estate leasing is to rent a building by paying royalties to the owner of it is usually a leasing company, with the ability to exercise the purchase option at the end of the rental period to acquire well.