I’m not sure if this is the right area to post this question.
I have a 16 unit Townhome/Loft construction project in the Phoenix AZ metro area (Tempe, AZ), approximately 1,000 feet away from the largest University in the US, see article link below:
The units are 2bd/2.5ba/2cg - plus an additional den/office space, at nearly 1,750sqft per unit with 520 sqft of terrace/patios. A 23’ wide X 30’ deep two car garage, 270 sqft “small” private back yard with grass, 9 to 10 foot ceiling in living areas, with large open “loft” area with 20+ foot ceilings and solid granite counters, 42" cabinets, with designer kitchen and baths place these units into the low to middle price range of “Like” properties.
The land cost (4 different lots/structures with existing structures - the existing structures will be deconstructed) was $1.2M and I have acquired it with multiple 95% LTV investor residential loans.
Soft cost of Design/Engineering/Permits/Blueprints is approximately $200K (3 months into the 12 month process). All elevations/zoning/floorplans have been approved by the City of Tempe and are going through the City’s design and review process as well as a few City Council meeting and Neighborhood meeting.
Due to the Phoenix Metro Areas growing pains (read as: lot’s of new housing developments = lot’s of appreciation.) in the last three years, all the City’s Planning and Development Departments are slamed and have a huge backlog that is slowing down all new development.
Hard cost of construction is estimated at $3.3M to $3.4M. Approximate total project cost $4.7M to $4.95M including Sales/Marketing Cost, Construction Materials Overage Allowance and Projected Interest Payments during construction.
Current market conditions will allow for unit pricing at $375K or $214 per sqft, estimated market value upon completion is $399K approximately $229 per sqft. A 6+% increase during the entitlement/design/permitting stage of the project which is expected to take roughly 12 months total (9 more months).
The gross projected profits are $6.4M with an estimated 28% Net Profit Margin or $1.4+ million.
My question is: What are the best ways to structure this deal using as little of own capital as possible while retaining the largest percentage of net profit?
FYI: My FICO’s are 712, 735, 746 according to my last TriMerge, a week ago. I have existing capital but only want to contribute about 5% of the total deal cost. The main reason for this is that I have located other deals that are similar to this and want to keep my working capitial pool as large as possible for these future deals.