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New Construction Financing for Mid-Rise Condos - LoanUniverse Community

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New Construction Financing for Mid-Rise Condos


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#1 Guest_James Laughton_*

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Posted 14 November 2004 - 12:45 AM

Dear Loanuniverse,

I have read your 4 part series on Constructions Loans in addition to the many forum posts. Thank you for all the great advice. I would also welcome your opinion on my particular circumstance. I own 3 contiguous properties in a downtown area (with a downtown view) in an area that is exploded with new construction. It is a nice area and getting nicer all the time.

All 3 properties have houses on them which I could sell for a modest return and be done with it. Or I can sell them to a Townhome developer like Perry Homes, et. al since they love contiguous lots. They would simply bulldose the 3 houses and build 9 townhomes in their place. But again this would leave a modest return since Townhome developers aren't too generous. Which leaves my final option and the most potentially rewarding. I could develop the 3 properties myself by building a 5 story building with 12 - 15 condo style units (each with a fabulous view) across the 3 lots. I'm guessing a brand new 5 story building with 40,000 sqft would cost $3 - $4 million. Since the whole project would hinge on financing the construction (I already own the property), do you think any bank would back me (and just me) with a net worth right around $1 M.

I read your response to MarkM about the 4 criteria but am I dreaming to think I can get financing for such a large project? Especially since it's my first time. But I do already know a great construction company that would oversee the whole project and they have a good reputation in my local market. I think that I meet the first 3 criteria you mentioned but no. 4 is so far away for me, that it doesn't seem worth exploring further. Although the dollar signs are flashing in my head.

Thanks

#2 loanuniverse

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Posted 14 November 2004 - 02:59 PM

James:

You will more than likely need a partner to get a bank to provide you the financing. This partner would be an experienced developer that has done similar buildings with you being the passive investor.

I do not know of any bank that would grant you a loan for a $4MM project without experience or without a stronger net worth position than $1MM. In addition, your personal net worth needs to be discounted by taking out the properties involved and other items. Your $1MM net worth is sure to shrink.

#3 CMBanker

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Posted 12 December 2004 - 10:23 AM

What is the land worth? How much additional cash would you be infusing into the project? Inclusive of the land value and your cash (which would go in ahead of any 1st mortgage construction debt), what is the total equity contribution as a percentage of the projected cost?

#4 pcinguina

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Posted 29 December 2004 - 04:06 PM

Breif me on the situation again.
Contact me via email or office phone.

PETER

#5 dtdmogul

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Posted 29 December 2004 - 04:59 PM

We've gotten people with similar balance sheets 10MM plus loans. You need to find an aggressive local mortgage banker who has exellent local bank contacts. I would be happy to help you, but if you are outside Florida you are better off with someone in your own area.

I agree that you should be able to count the land as your equity contribution. Most banks will lend approximately 90% of cost, buy you can lightly pad that figure to include development fees and other reasonable soft costs, which in the end can make the loan close to 95% of the actual cash required to complete the project.

You will also need a bonded GC to do the construction. Use as many prominent professionals to complete the project as possible. For exampe, get the largest residental condo seller as your listing agent. They may be willing to give you a market study on comps prior to your seeking financing if you agree to use them as your listing agent if the project moves forward.

If you have any questions or are in the area give us a call.





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