Forward financing: what is it, features

Forward financing, or sale, or transaction – this concept refers to transactions for the purchase of real estate, in which there is a gap in time between the transaction itself and the transfer of property property rights, t. e. The transaction was concluded long before the completion of the construction and receipt of property rights.

Typically, during a forward transaction, there is an advance payment, intermediate payments are likely (when the buyer invests funds in construction) and balance sheet at the end of the transaction – after the seller issues property rights upon completion of construction. During the forward transaction, the cost of the object is created according to the same mechanism as when acquiring a ready -made object, it is calculated by the ratio of the expected net income from the operation and the capitalization rate. The difference is that under a forward transaction, the capitalization rate will be higher than when buying a built building, which is a risk to the buyer.

Forward Sale to the departer saleser is beneficial for the fact that ahead of time is clear the system of his exit from the project. It is easier for such obligations to get a loan, to involve tenants to the participation of. D. For the seller, the disadvantage is a fall in the sale price and a small advance payment when concluding a transaction (about 15% of the price of the object).

Now you can attract forward financing only under a highly professional project. There is a risk that the object will not be completed on time, and therefore it will be difficult to return the advance, but the owner retains control over the project.

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