Help with newbie finance profitable project… - Posted by IMReal
Posted by IMReal on April 29, 2002 at 17:58:29:
I have an interesting deal that I am unsure how to fund. I want to avoid signing personally (if possible no recourse) and want to avoid of fees and a high interest rate.
Even though I dont want to sign persoanlly, here is some more info on me; I have an avg fico of 780 and have been un/under-employed for about 14 months, but have over 12 years of employment history.
The deal involves some 4 lots that I already own. I am developing them by using pre-fabricated component construction (which brings the cost way down and my control way up). They will take about 8-10 weeks to install once the permit is approved - so not long enough for construction financing (I think). I plan to develop them one at a time and get them rented before going on to the next, although I would be inetrested in doing 2 at a time. Anyway they are duplexes in a market with high demand.
It is going to cost about $88k to install each duplex on the land (which I recently bought at tax sale) . The land could comp out at $7k/ea if I look at other lots in the neighborhood (based on tax roll) (obviously I paid less). I have four lots.
I talked with a bank in town which financed 2 duplexes just like mine and the loan officer told me that when they were done they would be appraised at $110-115. I understand from talking with some folks that this bank would only allow people to finance 2 investor duplexes, so it wouldnt work for me.
I have $40k in cash in a new LLC that I control, and which holds title to the lots and has no liabilities. I’d like the LLC to own everything and if it needs to pledge the other lots… well that may be ok, just as long as I can avoid taking personal liability.
I’d like to rent out these duplexes because it looks like I can put 25%+ of the rent roll in my pocket (if I put 20% down with 8% interest). Thats some good positive cash. But, it starts getting a whole lot less interesting at the 10.5% which http://www.property-loan.com/ advertises.
One other thing; local lenders have been talking with me about;
*A- I cosign the note, max 20y note (30 yr amo) w/ 70% LTV based on value of project (yes thats the smaller number).
*B- I cosign, 3yr adj, 20 yr note, 7 1/4 + 1pt w/ 80-85% LTV based on value of project
Another alternative is; I know people who can partner (help me with $$) during construction to get the units built. Or can I get an unsecured line somewhere? But then I want to finance at completion based on appraised value. At that point my current thinking is that I would like 80-85% LTV, under 8.5%, 30+yr amo, 20+ yr note, min fees and super-size it. Then repeat…
Is this at all possible?
Any help or insights would be greatly appreciated.
Oh, the property is in Texas.