Man, this is something bigger than what I probably should do at the moment. I am thinking about this all the time and am scared too but see a great opportunity to make good money and more importantly to “launch” me in this locally at a wonderfull platform.
So, Really need expert’s advice and know how and DO’s and DON’Ts on this one.
I am looking at a lot of 15 acres here in Columbus OH. Listed at 1.25 Million but will probable get it at 1.1 million.
This 15 acre is on rolling hill in a very desirable neighborhood.Not much like it left around here. Everything is developed allready.
Met with a developer who thinks it will take approx 350K to develop it and we can put 12 lots on it. He is thinking that we can sell lots at an average of 250K a pop, bringing 3 million in revenue.
If I borrow money at 15% (I am hoping there is cheaper money out there like 6% or so with very little in closing cost with the option of paying interest at the end of loan etc) for 2 years then we are looking at 405K in interest etc. I put in another 95K for the Misc and say 500 in interest and Misc as cost oh holding it.
We can still take home 1.15 Mill in 18 to 24 months.
I am calling around to see what will be the realistic price of the lot. I do feel that 180K is minium for a lot in there as I see lots selling for that price in lot less desirable place close by.
Even at 180K we take home 310.
Here are my variables / Questions.
I gotta make sure that we can put 12 homes on it. How do I verify that. Developer I spoke to says that we can get confirmation from Zoning commission etc on that. How do I make sure that we can “actually” do that ?
How do I determine the actual cost of development on the lot?
FINANCES: I called one mortgage banker this morning to see what will I get in money. What kind of loans can i get for this?
I am probably mid 600’s in score and can put 5% down. Should I go stated?
Are there any kind of loan products or private money lenders out there which will fund this with option of tacking the interest payment at the end of the say 2 year loan period so i can have zero negative cash flow after we bought the land ?
I asked developer if he will be willing to buy this lot with me as a partner and will his money in it as well and he is ready to bring in 25% to 50% of the money with him. This makes me feel lot more comfortable. Should I bring him in or not ?
If I put a contract down and am unable to do this, can I wholesale this deal to some one
Any other suggestions, do’s and do not’s will be very very helpfull. HELP please
How about an investor putting up 100% of the funds, including purchase, all fees, and interest carry charge for up to 2 years.
For a 50/50 split of the profit!!!
Minimum Loan is $1,000,000 but rolling fees and interest into this loan would easily make the minimum even if you get a good deal on the land purchase price.
Email me if interested and I will provide additional details of the program!
You got my ears. What will it cost me other than the profit ?
BTW, I should mention that there will be one more guy other than me who is actual builder / developer who has to do the dirty work. Put that in the mix please.
Investor Is willing to provide 100% funds to purchase and carry land from purchase to sale in return for 50/50 share of upside (or downside) with speculator/developer.
$1,000,000 Minimum project cost.
$5,000,000 Maximum project cost.
Hold period should be expected to be less than 2.5 years
Critical to an approval.
Borrower/Partner must have successful experience
and good credit
Land must be entitled and have utilities to it or nearby
- Land goes in at purchase price (investor funds).
- Exit strategy must be sale of lots (not construction)
and exit must be practical in 2-2 1/2 years
Borrower/Partner takes no income or profit until loan is
paid.
Profit split is made after loan is paid and split is 50/50.
Property needs to be in a high absorption market to allow for a successful exit stratagy in as short a time frame as possible.
Fees that are rolled into the loan is a minimum 1% of loan amount for loan as well as all Normal legal and 3rd party loan fees.
The interest rate for the loan is calculated at approximately 15-16% “Interest Only”. However, this amount is also added to the loan so there are no monthly payments required (interest carry is financed).
This is also the major determining factor in whether or not a project is a good candidate. Even when considering Interest Only rates, 2-2.5 years of accumulated interest at 15-16% can take a big bite out of potential profits.
All expenses (including interest) are subtracted and settled out at end, at which time profit (or loss) is split 50/50.
If you have further questions, please email them to the address listed below…