Warning: Illegal string offset 'html' in /home3/loanuniv/public_html/forums/cache/skin_cache/cacheid_1/skin_topic.php on line 909

Warning: Cannot modify header information - headers already sent by (output started at /home3/loanuniv/public_html/forums/cache/skin_cache/cacheid_1/skin_topic.php:909) in /home3/loanuniv/public_html/forums/admin/sources/classes/output/formats/html/htmlOutput.php on line 114

Warning: Cannot modify header information - headers already sent by (output started at /home3/loanuniv/public_html/forums/cache/skin_cache/cacheid_1/skin_topic.php:909) in /home3/loanuniv/public_html/forums/admin/sources/classes/output/formats/html/htmlOutput.php on line 127

Warning: Cannot modify header information - headers already sent by (output started at /home3/loanuniv/public_html/forums/cache/skin_cache/cacheid_1/skin_topic.php:909) in /home3/loanuniv/public_html/forums/admin/sources/classes/output/formats/html/htmlOutput.php on line 136

Warning: Cannot modify header information - headers already sent by (output started at /home3/loanuniv/public_html/forums/cache/skin_cache/cacheid_1/skin_topic.php:909) in /home3/loanuniv/public_html/forums/admin/sources/classes/output/formats/html/htmlOutput.php on line 137

Warning: Cannot modify header information - headers already sent by (output started at /home3/loanuniv/public_html/forums/cache/skin_cache/cacheid_1/skin_topic.php:909) in /home3/loanuniv/public_html/forums/admin/sources/classes/output/formats/html/htmlOutput.php on line 141
Financing for a New Small Developer/Builder - LoanUniverse Community

Jump to content


Financing for a New Small Developer/Builder


4 replies to this topic

#1 bkola

    Part-Time Teller

  • Members
  • 3 posts

Posted 02 November 2004 - 09:21 AM

Is there a way to get financing for a small developer to build custom homes and/or small developments of about 50 homes.

We (my husband and I) have remodelled a couple of homes and built about 3. This is a new company and it seems like a vicious cycle - the banks will not loan you money as business because you are too young and how am I supposed to improve my portfolio of homes if I do not get financing? We have made a few mistakes in trying to get things working. The last house was built in the wrong side of the city and is yet to be sold. It was originally started on contract and the buyer fell through as they had some financial challenges. Believe me we learned our lesson.

We have been working with our own funds and credits up to now and we are now strapped and going with our personal credit does not seem to be an option anymore as we are top heavy with the debt to income ratio.

Is there any financing possibilities?? Are there any individuals or insitutions who have faith in hard work, better judgement, viable project and will give financing with sweat equity on our part? We have explored all options known to us and the more we try the worse it seems to get. The last time we tried to get a loan, the bank refused because they say the company is too new and has too many credit inquiries.

I know we can make the good if the resources are availabe. We are hardworkers and can turn around a loan even as low as $150K as we intend to build in the right location this time. Our dream is to develop small single family subdivisions around the Dallas/FortWorth area in TX.

Any advice, pointers and/resources will be appreciated.

Thanks

#2 loanuniverse

    Administrator

  • Admin
  • PipPipPipPipPipPipPip
  • 1,251 posts
  • Gender:Male

Posted 02 November 2004 - 01:53 PM

Dear bkola:

I am going to be as honest as possible in my feedback so please do not take offense.

”…. Is there a way to get financing for a small developer to build custom homes and/or small developments of about 50 homes…” Yes there is, but for what you have told me, you guys are still too far away from this level of financing. You mention building 3 homes, which were probably not built all at once, and your goal is to get financing to build 50. Even when talking about really cheap homes in a low-income neighborhood, you would still need at least $1 million in equity to pull a project like that off.

”…. the banks will not loan you money as business because you are too young and how am I supposed to improve my portfolio of homes if I do not get financing? …” It will take more experience and time. There is no other way around it. The lending officer might empathize with your situation, but it ultimately becomes a business decision.

”…. Is there any financing possibilities?? Are there any individuals or insitutions who have faith in hard work, better judgement, viable project and will give financing with sweat equity on our part?…” There probably are some, I just haven’t met any yet. You might be going into this with the best of intentions, but you are asking the lender to take a level of risk that no lender should endure. There is a name for people that are willing to take that risk and is entrepreneur or equity investor. There is no reason to lend you money and hypothetically suffer a 1 in 10 chance of default when giving the money to an established developer gives you at worst a 1 in 50 chance of default. Are you willing to pay five times the going interest rate? …. Hmmm never mind, don’t answer that, I am afraid you will say yes.

”…. Any advice, pointers and/resources will be appreciated …” You need to get rid of the unsold property. Not only is it draining your resources, but having unsold inventory does not look good.

You need to get equity partners and run some numbers as to what would be the optimal number of units that you can build at once. You do not need to work on 50 units to make a lot of money in this trade. I read less than an hour ago an appraisal for a 20 unit townhouse development that is going to make that developer $1 million dollars in 24 months with a $1 million investment {above and beyond the entrepreneurial profit of $600,000 allocated to the construction costs, which he gets to keep if he acts as GC}. Of course the key in this scenario is that the developer is coming in with $1 million in equity. No bank would give him the loan otherwise, and he has done half a dozen of these projects already.

I would also try to avoid mentioning that you got stuck with a speculative property in the wrong side of town. Did I mention that you need to sell it?

#3 bkola

    Part-Time Teller

  • Members
  • 3 posts

Posted 02 November 2004 - 03:07 PM

Thanks for your prompt and clear responses. We do have numbers crunched and the project for 50 houses or more is something we know we will eventually get to. It will be foolish to expect that to happen over night.

I guess we will just keep going as we are and see what works out.

Thanks again.

#4 bkola

    Part-Time Teller

  • Members
  • 3 posts

Posted 02 November 2004 - 03:09 PM

And that was a good twist of humor at the end.. believe me.. I know how much we NEED to sell that house..
Thanks!!!

#5 loanuniverse

    Administrator

  • Admin
  • PipPipPipPipPipPipPip
  • 1,251 posts
  • Gender:Male

Posted 02 November 2004 - 05:00 PM

Good luck, you can get there it will just take some time. Just cross your fingers and hope that the market does not tank in your area, because if it does then it will take a lot longer.

You should read up on news of what is happening in the Las Vegas market in the last few months. It is a sobering account of a market bursting.





1 user(s) are reading this topic

0 members, 1 guests, 0 anonymous users