Last Updated on February 26, 2024 by Nasir Hanif
As a property developer, it’s important to be across all the latest industry jargon. In this blog post, we’ll give you a rundown of some of the most common terms you’re likely to come across, including definitions of preferred equity vs. common equity, mezzanine financing and more.
Table of Contents
Preferred equity
Preferred equity is a type of investment that gives the holder preference when it comes to returns. This means that if the project is successful, the investor will receive their original investment back first, before any other investors are paid. If the project fails, however, the investor will lose their money.
Mezzanine financing
Mezzanine financing is a type of loan that is often used by property developers. It is typically used to finance the construction or renovation of a property. The loan is usually repaid through the sale of the property once it is finished being developed.
Bridge loan
A bridge loan is a short-term loan that is used to finance the purchase of a property until longer-term financing can be arranged. Bridge loans are typically interest-only loans, which means that the borrower only pays interest on the loan during the term of the loan.
Hard money loan
A hard money loan is a type of loan that is given by a private lender rather than a bank – they’re typically given to borrowers with bad credit or no credit history. The interest rates on hard money loans are usually higher than traditional loans because they are seen as being high risk.
Due diligence
This is the process of investigating a potential investment in order to ascertain whether or not it is a good investment. This usually involves looking at financial statements, conducting background checks and making sure that all relevant information has been considered.
We hope you found this guide helpful! Remember, as a property developer it’s important to stay across all the latest industry jargon – so make sure you bookmark this blog post for future reference. And if you’re ever in doubt about any terms you come across, it might be worth speaking to an industry professional for further clarification.
Understanding Equity and Financing in Property Development
Navigating the world of property development requires a solid grasp of industry-specific terminology. In this comprehensive guide, we’ll break down key concepts such as preferred equity, mezzanine financing, and more, providing clarity for both seasoned developers and newcomers alike. Understanding these terms is essential for making informed decisions and maximizing success in property ventures. Whether you’re exploring investment opportunities or seeking funding for your next project, this knowledge will serve as a valuable asset in your toolkit. Let’s dive in and demystify the complexities of property development finance.
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