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constructionlending
m
uch is written about the cutthroat
real-estate market in Canada,
especially in major urban centres
such as Vancouver and Toronto,
where homeowners oen find themselves in
bidding wars. And mortgage brokers know all
too well that the flipside of this is an equally
competitive market for residential mortgages;
where one or two decimal points could make the
difference between winning or losing a deal.
While construction lending isn't for
everyone, for business-savvy brokers looking
for a new challenge, the financial rewards can
be substantial. Typical broker commissions
are oen valued at several millions of dollars,
translating into returns of tens of thousands
of dollars for a single deal.
e most obvious prerequisite for
getting into the commercial lending game
is to take one of the many commercial
lending courses offered. Less obvious is the
ongoing need to educate yourself about the
changing landscape of commercial lending,
especially when it comes to financing infill-
construction projects.
e "sweet spot" for the infill marketspace
are projects that either fly under the radar of
institutional lenders or have one or more aspects
that are deemed "unsuitable" by major banks. Yet
many of these projects are not only viable, but
with the right mix of broker, builder and lender,
can be highly profitable for all parties involved.
Here's a brief rundown on the different kinds of
projects out there that are getting financed – all
profitable, and all financed through alternative,
as opposed to institutional, lending:
cleaning uP: Once the location of
a commercial/automotive business, the site
required a bit of soil remediation due to some
of the soil being contaminated with gas.
Original financing of just over $1 million was
provided to purchase the site, cover the costs of
cleaning the site up and severing the property
into nine residential lots. An additional round
of construction financing will be provided
to finance the nine homes once the severance
is approved.
Takeaway: e banks weren't prepared to
touch this project until the site had been entirely
cleaned up. Alternative lending turned vision
into reality.
HistoRy lesson: A former high
school built in 1923, the developer purchased
the four-storey building on 2.1 acres for
$1.7 million in 2011 in order to convert the
historically designated property into a
CMB MAGAZINE cmba-achc.ca spring 2016 | 37
alternative lending allowed the
client to sidestep considerable delays
and administrative headaches when
developing this historically designated
former high school.
