Construction Loan for Multi Family Townhome/Loft?

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.

I will look into construction financing for your project and should have some numbers for you by tuesday.

I will also try to get you an answer to your questions.

A quick question regarding your project details.

You stated you acquired the land as follows:

“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”.

If this is the case, and the “Structures” as well as the land is the collateral for the 95% Investor residential loans, what happens if the lenders for these loans find out you have bulldozed the structures and thus negatively effected their collateral.

Since you are here asking for financinal options and advice, I would think this would be an issue that would be of interest to any potential lender/funding source.

However, the funds you have outlined as being required, might have included funds to pay off these “current loans” and if that is the case, then it should solve theissue. I just did not notice that in the details of your plans although I might have just overlooked it.

Best of luck!

I’m thinking your going to have to put more towards the deal than 5%.

I do not know of any lenders that will do more than 70-80% LTV unless the borrower is very strong.