305chap10 - Project Funding Chapter 10 Money A basic...

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    Project Funding Chapter 10
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    Money A basic resource – 4Ms How does owner/entrepreneur acquire  project funding?
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    Owner financing Requires two types of funding Short term-construction loan Long term-mortgage loan
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    Construction Loan Provides funds for facility construction Will be repaid by Mortgage loan
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    Figure 10.1  (p. 160) Project money flow.
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    Mortgage Loan Long term financing Seeks mortgage loan commitment first Banks do much research and evaluation Leverage
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    Pro Forma Indicates projected income and expense  throughout the life of the mortgage loan. Cap Rate factor Loan is 75% of calculated economic value
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    Example Pro Forma from book
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    Figure 10.2b  (p. 163) Construction cost breakdown for 75  apartment units.
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    Mortgage Terms Rent roll achievement Break even point Ceiling of the mortgage Floor of the mortgage 75% of ceiling
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305chap10 - Project Funding Chapter 10 Money A basic...

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