I am currently buying land with a value of Approximately $800,000. I plan on developing it in 2 phases. The first phase will be a 10,000sq ft building that will be offfice and light industrial with the ability to convert the downstairs to retail. The building is going to be pre leased by one of the partners for his construction company and he will occupy approximately 50% of the building. The total cost of the building is $1,600,000 not including the land which will be paid for cash. I was wondering if a bank would issue a loan on the building collateralising the project with the equity in the land. I am trying to stay away from a personal guarantee on the loan, and have it issued to the corporation that we are currently forming.

A bank will issue a construction loan for the costs. As of right now there is no building so it has to be constructed first.

If your numbers are correct, we are talking about total costs of $2,400M. If the constructions costs in the amount of $1,600M are fully financed, then the loan-to-cost is 66.7%, which should be ok with most lenders.

It will be difficult to find a lender willing to do this without a personal guarantee. Lately, I have been told that this varies depending on the market. But in my market, a guarantee is required.

Permanent financing can be arranged with the same lender that does the construction. Keeping this company that is going to occupy 50% of the building in the loop might be a good idea to qualify for an SBA 504 loan.

I probably should have mentioned that the property is located in the central valley of california (just west of sacramento), and all the partners have credit exceeding 750

Go to a local commercial bank. Most of the internet lenders are not setup to handle the construction phase.

It takes monitoring and expertise to do that.

Todd,

Call me I can help you with that particular deal. I work with 8 Commercial Lenders in the Northern CA area that would love to handle your loan. If those dont suite our needs than I have 20 more that would love to talk to you about constructing that building. LETS TALK!

If your partner is willing to lease 51% of the building, you may quaslify for SBA 504 financing