I am considering the purchase of a pad site in a strip mall setting. I am looking to finance around $650,000 for the land and perhaps another $500,000 for construction of the building. My question is this. I plan on financing as much as posible so I expect to have a large monthly payment. Once tenents are secured I should have no problem servicing the debt but between the date of purchase of the land and the date when tenants begin payments I do not have enough resourses to take care of the monthly loan payments. Is there anyway I can set this up so that all loan payments would begin after completion of the building/tenant occupancy? It's basically a cash flow problem. I have credit to get enough financing but not to float the loan without tenants. Any help/ideas will be appreciated.

I don't know anyone who would consider this. Without pre-leasing and by asking for deferred payment until you can rent the space, you are asking the lender to take all of the risk so you can reap the reward. Without a firm lease in hand, you have no way of knowing whether you can even rent the property at an amount sufficient to cover the debt and the operating expenses. Also this sounds like it would be a single tenant property. How can you be sure that you can get a credit worthy tenant with an operating history to ensure steady, long term cash flow? On top of that you want to finance as much as possible? Even with a solid tenant you would still need to put down between 10-25%. (unless it is a CTL)

All you really have to offer is good credit, which won't help you repay the loan. Another possibility is if you have other leveragable assets that can be pledged as security ion the loan.

If you have the money to put 10-25% down, then use some of it to buy a purchase opton on the property. Essentially you pay money to tie up the property for a certain time allowing you to search for a tenant and secure financing. If you don't find a tenantor cannot secure financing you lose your money.

It was brought up before, but it is worth bringing up again…. how much are you bringing into the project?

A project of this size calls for several hundred thousands in equity, and probably some assets in your personal balance sheet that give the lender some comfort.