Apartment Development

Financing, Hard Money Lenders, Private Money
1

I have started a C- corp and am going to get into development of luxury apartments, condos, mixed-use, and retail properties. I want to get some advice on the types of loans that are available for development.

Right now I am talking to a agent about a 28,000 sf lot in los angeles going for 1,300,000. I am working with an architect of designing a 15 unit luxury apartment/5 retail mixed use property. My questions are:

  1. What type of loans are available for this type of project? I would like a 100% acquisition/ construction loan. If possible?

  2. Could I possibly get help from the city planning department?

  3. Should I develop and sell to a commercial management company or keep as portfolio real estate?

  4. How much my would my company have to bring to the table. We are working on some sort of business financing, and selling of shares.

Thanks in advance for any feedback and advice.

Kelvin Craver

2

100% will not be easily attainable. You will have to go with a Private Investor who will lend off the appraised value at 70-75%… The Commercial Sector does not offer 100% financing by the bank alone. They like to share the risk with you - the buyer. They like to see generally a 10% source of your income as invested interest into the purchase. I know of one way where you can acquire the property with only 5% down, but you would have to speak with me seperately about it.

3

Thanks,

What about a purchase of a 25 units or more apartment building. Would we be able to receive 100% loans. We are looking into buying commercial first then leverage to develop the other properties.

Kelvin

4

I do believe the only way 100% financing is attainable is by cross-collateralizing your other assets… or possibly going through a pledge asset program… without this you will not be able to have 100%…

5

Kelvin,

100% financing is a possibility, but as Jason said earlier, you may need some help from private investors. If the loan amount is over 5 million I do have a private source that would go 95% and possibly 100% financing. You would need to show strong credit (680+), very strong financials and a good resume documenting your history as a management company or investor with management experience. If you do not have any money in the bank (10% liquidity of the purchase price) it will lower your chances.

Commercial loans like this can be structured, however, credit and financials must ber VERY STRONG…

6

Thanks for the input. I do have strong credit and am working on some liquid funds. I what to obtain any loans not on my personal credit but on business corporate credit. Is this something that can be done without a personal grantor?

Currently our experience is in investments in single-family homes, but we want to get into commercial. I have a company that I am in discussion’s with that has suitable experience in commercial management of all types, which will handle all properties acquired by my company.

With Private investment what would be the terms. Would it be equity share or cash repayment. How would that work?

7

Typically you will need to personally guarantee the loan especially if this is a new business corp. There are non-recourse loans but the rates are higher and the ltv’s lower.