REM 500 Lecture Notes - Lecture 4: Operating Expense, Nnn Lease, Capitalization Rate

• School: Ryerson University
• Department: Real Estate Management
• Course: REM 500
• Professor: Cynthia Holmes

Document Summary

The longer the loan the more interest you accrue at a compounding rate. As soon as you finish your development, try to switch to a mortgage loan instead to save money. In canada, big banks like td are the lead development lenders. Funds are usually drawn out monthly (or quarterly) as construction proceeds. Bank can foreclose on the property in the event of default. Bank may ask for a personal or corporate guarantee on the loan (recourse lending) Usually adjustable rate mortgages, short term length equal to the duration of construction. Higher rate than usual mortgages due to riskiness. No periodic payments instead the loan is due in full (including accrued interest) at the maturity date . They evaluate and give an insurance rate and approval via: In process developments are more risky as they are not real assets yet, therefore increasing risk and increasing difficulty to secure loans and favourable interest rates.