Construction Funding: The Process of Real Estate Development, Appraisal, 3/e

This updated classic is unrivaled in its complete, single-volume coverage of financing real estate development

This thoroughly revised Third Edition of Construction Funding provides professional and student readers alike with the critical tools needed for developing any successful real estate venture. Using a case example of a 260-unit apartment development, the authors walk the reader through each project phase, offering invaluable guidance on raising capital, selecting markets, rating sites, securing insurance, creating joint ventures, understanding loan options, and mastering cash flow management.

Beginning with an overview of today’s real estate industry, Construction Funding acquaints readers with various types of business organizations in real estate, including the advantages and disadvantages of each. An entire chapter in this first section is devoted to the most critical tool of them all: negotiation. The second section of the book provides a step-by-step outline of the typical development process from start to finish. Included in this section are guidelines for:

• Creating a pro forma that will make projects profitable, not a loss
• Understanding the appraisal–the key to financing real estate
• Navigating a loan application
• Correctly completing all required documents to close a construction loan
• Writing a commitment letter that can seal a $15 million deal

The final, third section addresses the mathematical and technical tools of construction, including chapters on forecasting cash flow needs, calculating the time value of money, and funding and feasibility problems. Also provided are appendices containing loan forms, interest rate tables, and valuable information on federal construction programs.

Written by a team of authors with broad experience in the construction and real estate industries, Construction Funding is the book to guide undergraduate and graduate students in construction programs, as well as an invaluable reference for professional developers, planners, and contractors.

Table of Contents

Preface.

Foreword.

I. BACKGROUND.

1. Characteristics of Real Estate.

2. Different Types of Business Organizations.

3. Negotiation.

II. THE DEVELOPMENT PROCESS START TO FINISH.

4. The Development Process: An Overview.

5. Market Studies, Site Feasibility Analysis, and Selection.

6. Creating the Project Pro Forma.

7. The Appraisal.

8. Sources of Financing, the Loan Application Process, and Term Sheets.

9. The Commitment.

10. Closing the Loan: The Note, Mortgage, Construction Loan Agreement, and Unconditional Guaranty.

III. CASH FORECASTS AND THE TIME VALUE OF MONEY.

11. How to Forecast Cash Needs During Construction.

12. Basic How-to-Do-it Time Value of Money Calculations.

Appendix A: Exhibit A-1. Real Estate Promissory Note.

Exhibit A-2. Mortgage and Security Agreement.

Exhibit A-3. Construction Loan Agreement.

Exhibit A-4. Real Estate Unconditional Guaranty.

Appendix B: Exhibit B-1. The Gainesville Sun.

Exhibit B-2. Apartment complex put on hold.

Exhibit B-3. Hidden Lake gets approval.

Appendix C: Interest Tables.

Index.