Is it even a good idea to do land financing? Well, know now: Buying a lot to build the house or even resell is an exciting investment! But have you ever stopped to wonder if the interest of a banking operation does not end up nullifying these advantages? Be careful not to get carried away by anxiety. Maintaining prudence at all stages of the procurement process would be best. As we talk about a high-value investment, you must be careful and put the bills at the tip of the pencil. So, you can compare with the alternatives, such as the consortium, to see which is more attractive.
Follow the post today to evaluate whether the consortium is viable and learn the cost of financing land.
How does the real estate consortium work? Those who want to finance the Housing Finance System (SFH) find it difficult to acquire land without construction. This is because the idea behind the program is to favor the acquisition of their housing. Some banks offer alternative financing lines for the purchase of lots. However, the interest rate is even higher than that charged by SFH and the Financial Real Estate System (SFI). Thus, the purchase comes out much heavier for the pocket. Some people still do not know that you can also use the real estate consortium for land acquisition! That’s right; there are no impediments to this. Therefore, it is allowed to buy simple or under-construction lots in urban or rural areas.
Enjoy knowing some of the characteristics of this modality: security: the Central Bank supervises it; Accessibility: does not require payment of entry; Practically: can cover up to notary fees; Economy: no interest collection; Flexibility: it has longer-term options; Facility: has more affordable plots; Bargaining power: the letter of credit is worth as cash payment.
A pause to better explain the cost of the notary’s office: who buys land through the real estate consortium can also use part of the value of the letter of credit to pay the fees charged in releasing the documentation of the property. Did you buy the land and still have a balance of the letter of credit? Then, you can use it to pay for the notary fees, documentation, and taxes! Why is it an alternative to financing? Many people who want to buy land soon face financing constraints. Also, due to the abusive interest in the modality, the financial value is much higher than the initial one. Yes, the loss is significant. Want to get an idea? Do the math! Imagine you want to finance land that costs $100 thousand in 180 months.
Find a bank that practices a rate of 8% a year (equivalent to 0.6434% per month) and finances a maximum of 0% of the land value. You will, therefore, give 20 thousand inputs. When making the account using a financial calculator, you will see that the amount will be $751.68 under these conditions. when you get under these conditions, the bank will come up with a figure well above that! They will be included in the value: Bank fees, tax collection, insurance, and other added products. All this is embedded in the amount to be financed, composing the final installment! Key areas to consider.
Consortium Governance
Bidders in any competitive auction procedure need to progress decisively and quickly, so clumsy decision-making needs to be avoided to facilitate an agile and coherent approach toward the customer. In private equity-led consortiums, often, 1 or 2 lead sponsors are handed authority to make almost every decision for the benefit of the consortium and give a single focal point for commercial and legal diligence. Without any lead, investors can risk leading themselves to a deadlock or profuse sellers with a jammed negotiating table and overlapping conscientiousness processes.
Once the deal is acknowledged, governance is commonly allocated correlatively to each consortium member’s economic commitment concerning the exercise of rights under the accession documents and typically the organization of the investment. Somg or strategic partners may be assigned outsized rights to remember their valuable non-fiscal contribution to the consortium. With few consortiums of 2 or 3 parties, it is ordinary for many affairs to require agreement.
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