I have been working on a development project for over 6months now and almost everything is in place. I am looking to develop 22 acres of land at an ideal location (has three entrances and on the main drag of the fastest growing county in Ohio which is also listed as the 16th fastest growing county in the US). I have plans for a mixed use, 150 modern 1 and 2 bedroom condo units, frontage parcels will be commercial, ie coffee shop, dry cleaning, bistro, etc.
Land is $2m ($91k per acre), condos will be estimated at $150k each to build and will be presold during construction, commercial spaces will be $1m, $1m for landscaping, parking, lighting, city services, etc.
Condos will sell for $189k and $229k for about $32m total.
Commercial space total of 10,000 sqft will lease at $32/sqft including cam and all fees for about $320k per yr. but it will all be sold off after leases are in place for about $2.1m which would be based on an 11% cap rate.
Meeting with the bank the week to see how this can be done.
I have a little over $250k in savings and have an 810 credit score and have used the bank for a SBA loan five years ago to build my own business which I sold this year so I have a pretty good relationship with them but here is MY QUESTION…
If they say 20% needed for the lending, or if they cannot offer a construction loan, what other ways can I get the lending for this size of a project to be done?
Projected profit of over $8m on this little project of mine.
I’m no lending expert so I’m not going to address the financing question. But here’s some food for thought:
You might want to consider spending a hundred thousand extra or so and put a fence and gates around the condos and charge an extra 40-60k or more per unit.
I am the CFO of a developer in Atlanta and we have done a couple of projects like the one you are mentioning. Be warned that what you are looking to do is no small undertaking.
You did not stipluate whether you already own the land or not but I am guessing not. I am going to go out on a limb here, but I can almost guarantee that the only way you will get this project financed is if you bring an equity partner into the deal. If you project is good enough, there are a lot of players out there who would love to take a look at it. Most equity partners will require a preferred return but if you can get in an out of the project quick enough (or get permanent financing soon after being stabilized and pay back the equity) you should be okay. Good luck!
I like your ambition; however, I feel that this project may be a bit to large for you to undertake on your own. Here are some things that your bank will point out.
1.) Experience - How many projects of this similar scale have you developed before? My guess is that this is much larger than anything you have ever developed before based on your questions.
2.) Financial Capacity - with only $250K in savings you do not have the financial wherewithal to put in the required amount of equity or cover the interest payments and or any cost overruns that you may encounter in a project of that size. Even if you found a private source to contribute the equity neded, you are not a strong enough guarantor for that size of loan.
This scale of project would require someone with more experience and financial capacity to obtain the project financing that you seek. An SBA loan is no comparison to a real estate development loan. My suggestion would be to either flip the project to another developer or find a partner and take a smaller slice of the pie.
As luck may have it, the project is now unavailable. The department of transportation for the state is putting a roadway directly through the center and the current owners have taken it off of the market as they anticipacte they will make a lot more money once the road is complete because they can sell outparcels.
