Sweet Deal.. How can i get a loan on this

5 Replies

Hi Everyone. My family is fortunate enough to own some real estate in the LA area.. so my goal is to take these properties to the next level.. 

one property we own is an amazing lot in a great upcoming neighborhood.. I know both neighboring owners and have discussed purchasing their lots... the catch is I don't have the money to buy them! They're not down for owner financing... i've spoken to a couple banks and they don't see the value in the purchase because they said they need a valuation on the property alone and not with the connecting properties (makes no sense to me) so now I've turned to Bigger Pockets and I need some suggestions.

Breakdown: 1 Neighbor wants $1.3 million and the other i can get for 900k  both of these + my land brings total SF to around 18k+ sf of land. 

projects in the area have sold - just land value for approx $300/sf  this lot would be far superior given the location and it becoming a full city block...  so this project would be worth minimum $5 million..   

Advice Please 

@Ben S.

Hi Ben

Few questions

1. Are you planning on flipping the lots or holding onto them? (I saw the possible thought of just expanding the one you have, but if you wanted to explore the possibility of buying fixing and selling, you may have a lot more opportunities of finding financing or JV partners to do it with you).
2. How much Equity do you have in the properties you currently own?
3. Have you run any rough estimates of the ARV and costs if you were to update and resell the two homes?
3a. How many months would it take to complete the work you’re hoping to do to the neighboring homes?

Nabil Suleiman, Real Estate Agent in CA (#02004196)

@Nabil Suleiman  

Hi Nabil, 

1. The lots combined can be built into a 30+ condo/apartment complex + retail on the bottom with underground parking.. my thought was to get plans and sell with plans. Or if I can get funds to build the project and then sell?  Building would be worth upwards of 20mill + 

2. the property i own that is in the middle and the best lot for the project used to have a house on it, but we demolished that and it is only land value now.. practically free and clear.. banks i've spoken with will not loan me money on the land. 

3. the costs to get the plans can't cost too much considering the value of the project... not trying to update anything, but want to tear down and either build or sell. 

4. plans and permits could take 3-6mo ? i'm just guessing as i haven't spoken to an arch yet.. but the flip with plans could take 6 mnths to sell or it could take  about 2 years to build the entire project. 

Would the neighbors be open to some kind of joint venture agreement? They could sign the land over and then maybe you could get a construction loan and use the land as collateral for the loan. Hopefully no money out of pocket. My friend is a builder and that’s sort of what they do except they buy the land then use it as collateral for the construction loan.

@Ben S.

Hi Ben

1. Is there zoning that you have confirmed is accurate with the city? Mixed-use buildings are pretty particular with city planning, are there other similar projects already existing on your street? is the 20mil based on comps of something nearby that have sold?

2. Most banks do not loan for what your intention is, but if you do own the land outright then you do have the opportunity to pursue a construction loan like Ryan mentioned.

3. if your goal is to sell plans (approved I assume) then you have quite a bit of expense and months of city approvals/ meetings to go through before that is a reality. If you want to sell the concept of the project, then I would try to get your neighbors into a contract and find developers that would be interested in pursuing it. I would also get exact numbers and the exact zoning that would work with the project you are envisioning. You also have to keep in mind that in our current state, building is very expensive and has turned off a lot of developers. Add the plausible cost of steel prices fluctuating, and people are not jumping at every opportunity (I, of course, don't know where your location is and the total possible value, this is a generality)   

4. Depending on your city, your neighboorhood, and the restrictions/ complaints that come with it, it can dictate your time schedule for better or worse. Additionally, the architect you choose can also make it a positive or negative experience for you. 

The best thing to do is get as much detail as possible from zoning restrictions to what can actually be built on your combined properties, then get some numbers together to see if it makes sense, as well as get your neighbors lots under contract. From there I would reach out to possible developers that want to take it to the next stage, some may want to buy it outright, or maybe you can convince someone to let you JV with them if you front the land in total or in portion.

Nabil Suleiman, Real Estate Agent in CA (#02004196)

@Ryan E.   not sure if they're open to a jv.. but just dealing with them on negotiating sales prices makes me cringe already. working wth them on a jv would drive me nuts. thanks for the advice. 

@Nabil Suleiman  

1. There is a nearby project that completed a nice mixed use and a few on the market with the same idea.. i'm pretty sure the zoning would allow. the projected sales price is based off a nearby sale in 2016 -  that sold for around 400k per unit. 

i will do more research on the zoning and check and double check what can be built and get my numbers right... but then what.. i know the project will make money... my issue is how to fund it and move fwd 

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