Developers are the most critical part of the success of a syndicated mortgage.
1. The developer must have experience managing development projects into construction and onward to completion. Without a track record that demonstrates that ability the investor is taking the word of the person recommending them. Do your own due diligence. Check out the developers past projects.
2. It is important to know how the sales are proceeding. If the developers can’t sell the development they will be unable to complete the project. Ask to see the marketing materials. Do you think they are attractive and will convince buyers to buy? If they don’t, think twice. Visit the sales center if you can. Is the staff competent? This is what your funds will be paying for.
3. Smart developers will be looking to develop in those areas of the country that have potential for growth. That ensures the capacity for increased property values. Does the area where your development is located have the potential for an increase in value? Is there investment in that area? Transit? Amenities? Avoid troubled areas where industries have left town.
4. Developers can divert the monies for one project to another. Find out what is in place to mitigate that risk.
5. Has the developer zoned the land? The zoning can take 1-10 years. Look for projects where the zoning is complete.
6. The developer may find themselves dealing with a downturn in the market? Ensure the loan to value has enough room to protect the lenders’ interests.