Spec Home Financing
Since our primary concern is not lack of clients, but rather a shortage of units to sell to them, we are always interesting in ways we can increase our sale home inventory. If we can build more homes, we will sell more homes so on a limited basis we have taken on debt financing to do so. With this investment option, typically our company agrees to borrow from a private lender sums in the range of 1-3 million pesos.
The loans are structured for one year, interest only payments in the 12% range, with repayment of the principle upon the year anniversary, or whenever the spec home is sold. (Whichever is earliest) If the home is sold before its term comes due, we pay off the laon immediately, and pay the lender a bonus payment equal to 50% of the interest that would be paid if the loan went to term. Again, any money borrowed is secured by a Real Estate Mortgage on the house and lot that it relates to.