Posted by Joseph Milunas on December 13, 2005 at 01:19:55:
After getting an option on a large deal, how would one go about contacting a builder?
Financing Large Land Deals - Posted by Jon Morrow
Posted by Jon Morrow on May 23, 2005 at 13:33:31:
Who should I contact about financing large land deals? I’m working on several projects in the 3-7 million range. All but one of the projects are completely raw.
Local banks just aren’t cutting it. They’re great for small deals, but get extremely nervous for deals over $2 million.
Larger banks and conventional lenders usually end up wasting our time. Loan packages end up being over 90 pages long, which takes a lot of our time. Then someone on the committee doesn’t like the marketing report (despite a great appraisal) and we get turned down.
A friend of mine suggested contacting insurance companies. Is this the case? And which companies?
Any other suggestions?
Re: Financing Large Land Deals - Posted by Robert Hayes
Posted by Robert Hayes on June 07, 2005 at 08:20:15:
I am working with a few equity partners that are interested in land deals in the $7M+/- range. They do want a chunk to get it done but it will get done as long as the borrower has done their homework. If you want to email me a short 2 page executive summary on any deal, I will be glad to help, if I can.
Re: Financing Large Land Deals - Posted by ray@lcorn
Posted by ray@lcorn on May 23, 2005 at 16:36:07:
Jon,
Insurance companies are not going to fund the construction loan unless you have a very long and successful track record. They may offer a take-out commitment, but you’ll still be shopping for a construction lender, and still need to either have substantial pre-lease/pre-sale commitments or a ton of experience and capital to prove staying power.
It may be wise to take on a JV partner to get at least your first deal started, perhaps a phase at a time? I assume you have the property under control… are there any large developers in the area that you would be comfortable working with?
ray
Re: Financing Large Land Deals - Posted by wes
Posted by wes on May 23, 2005 at 15:36:11:
Land deals and especially Raw land deals are some of the easiest/most difficult loans to get funded.
Easy if you do not need a very high LTV.
Difficult if you do.
Most lenders approach land with the attitude there is certainly value there, but since most lending institutions are in the business of lending an not land speculation, the fact raw land might not be easily resold prevents them from being very agressive in their land loans.
If you have a specifice deal in mind, feel free to post it here and I am sure someone will be able to point you in the right direction.
Best of Luck!
Re: Financing Large Land Deals - Posted by Jon
Posted by Jon on May 23, 2005 at 17:17:24:
27 year track record, 22 successful rezonings, and near $100 million of real estate transactions.
We don’t improve our properties, so we don’t need a construction loan.
We already have JV partners that put up approximately $1 million per month for our deals, but that just isn’t enough. We’re losing opportunities left and right because we’re undercapitalized. Partners also take a lot of equity. It’s expensive funding.
Re: Financing Large Land Deals - Posted by Jon
Posted by Jon on May 23, 2005 at 17:11:54:
Here’s an example. We have a property near Charlotte, North Carolina that appraises for $6.5 million. We have $1.6 million owner financing and $1.6 million investor financing. The investors are friends and are ready to exit the deal. So, we’re hunting for a $1.6 million second or a $3.2 million first. That’s less than 50% LTV. The only catch is we want interest to accumulate until sale. No payments.
We’re talking with a local bank about financing the deal, but they’re a small operation and they’re afraid of the size of the loan. The larger banks demand interest payments and aren’t comfortable with us having no money in the deal.
Here’s another example. We have 235 acres in Mississippi, stretching across 16 continuous properties. We’ve brought each property individually through residential loans. The interest rates are nice, but we’ve had to put up about $2 million cash to get about $5 million of loans.
Between renting the houses and the trailer park on the property, we’re cash flowing about $25,000 every month. We’d like to get one mortgage on the entire project, making monthly interest payments, but the LTV is tight. We want a $5.5 million loan, but in its current state, the property is only worth about $7 million. We’re in the process of rezoning. When that happens, the property will double or triple in value, making the LTV easy… but that’s another three months of having no cash available.
Re: Financing Large Land Deals - Posted by Ethan
Posted by Ethan on June 02, 2005 at 15:57:06:
Jon,
There are two ways to structure your deal with no payment for the term of the loan. The 1st will be a new loan taking both existing and the second would be a new 1st and with a second.
On your second deal, there is a way to get up to 80% of the current value. Are you combining the parcels?
Email me if you would like to discuss the possible structure available to you.
Re: Financing Large Land Deals - Posted by Bryan
Posted by Bryan on May 24, 2005 at 11:31:52:
>We’re in the process of rezoning. When that
>happens, the property will double or triple in
>value
What is the current zoning and the future zoning?
Re: Financing Large Land Deals - Posted by cam
Posted by cam on May 24, 2005 at 10:00:30:
I don’t know of any lender that will allow you to make no payments on raw land or without your money on the line.
You may want to try Old Standard Mortgage the commercial lending division of Old Standard Life. They will want to see a 12-18 month exit strategy. I also highy doubt that they would entertain a no payment option. They will do land loans up to $10mm at 50-60%.
(800) 541-0828
Re: Financing Large Land Deals - Posted by wes
Posted by wes on May 23, 2005 at 22:32:17:
Your first example is easy regarding the LTV but unless you can show you have a contract on the property with a buyer, I thing the interest accumualating until property is sold is out of the question unless there are conditions agreed to.
What if the property is still for sell several years from now. You think any lender is going to allow that to happen?
Your second example is going to be difficult due to the LTV. If you have a good business plan that can show projections of what you plan to do and how you plan to do it, at least a lender has a place to start discussing the issue of how to get you where you want to go.
By the way, what part of MS as I have business connections there that might be of some benefit.
Feel free to contact me for further discussions.
Best of luck.
wesloans@earthlink.net
Re: Financing Large Land Deals - Posted by Joe Milunas
Posted by Joe Milunas on December 13, 2005 at 24:53:35:
I wanted to know if it is possible to go to large home builders with land that is already zoned and ready to build. We are looking at a 591 acre parcel and would like to know if you understand the process for contacting the builders? THanks, Joe