Competent builders who also feel confident about the market can keep themselves busy all year by building spec homes. These homes do not have a buyer when they first start building, but once the frame is up and the house is covered in and roofed then the house will begin to attract buyers.
For the Builder who understands the way the market works this can be very lucrative, as once the house takes on a semi-finished appearance then buyer emotion comes into play and the builder can get a very good price, well in excess of the build cost.
However they do need to build a house in the first place, and will need good financing to achieve this. While they may have a compliant bank, in general builders more often use a good mortgage broker to provide them with the correct type of finance.
The builder will need financing at certain stages of the project, including the section purchase, any architectural planning and design and consenting work, the flooring and the framework including the roof and external cladding and finally the internal cladding and fittings and finishing. The mortgage broker will need to arrange finance that can be advanced in stages, and if the building project is a one off for the builder then the finance will be short term and will be fully repaid once the house is sold.
However if the builder is aggressive in the market they may want to be moving their building gang from one project to the next, and they will need to have multiple projects on the go at the same time, all in various stages. If the builder and his mortgage broker are really smart they may be able to set up the financing so the finance just shifts from one project to the next, and takes on the appearance of a longer term mortgage. This requires more specialist financing, generally from a second tier lender. If the builder has been very successful in the past then he or she may be able to largely finance their own projects, and a mortgage broker will not be required although a very good accountant will be required.
This type of business requires a high degree of confidence from the builder, and also careful risk management if they want to be certain they don’t go bust if the market suddenly down turns. The cost of temporary finance is generally really high, and the last thing the builder wants is for their property to remain unsold for any length of time after they have finished it. To contact professional mortgage brokers in Papakura click this link.