Advice on Financing 18 unit townhouse project

8 Replies

I am planning on building an 18 unit townhouse community in Murray Hill, Jacksonville.  I am shovel ready, pending a few miscellaneous items.  I own the land.  The architect and civil engineer are finish up.  I have been working with a lender since April.  These projects take time, but I have been forced to fund more of this out of pocket than I was planning, due to the lenders time frame.  The loan was suppose to be done in 3 months and we are at 6 with no end in site.  It is effecting my working capital for other projects.  I could probably fund it myself, but it will take me longer than I would like and force me to pause all other projects.    

I am looking for another funding source. I would take on another lender or a JV partner. I am planning on selling them off to owner occupants, but could easlily convert to a build to rent.

Anyone had this sitiation before?  Suggestions?

I am open to creative solutions.

very tough loans to get and going down the loan broker rabbit hole is frustrating as you are describing.

for me there is only one way.. and that is Community banks..  its hard to bring them the first project but if your local and they are local and you establish good deposit relationship with them and show them your portfolio you can bust through. 

I have been able to get one in Charleston SC  and one I am using in Florida now.. Although the bank in FLA is not small regional its GA based regional .

Other wise for some of my spec loans I did in Charleston when I was at my credit limit with the local bank I used Lima one for over flow.  18 unit might be bigger than they will do.

Can you develop it in phases so your not having to go out on the limb and borrow a big chunk at once ??  or are they all attached and build one have to build all ? 

I have not done townhouses just because of construction defect insurance issues. 

Equity partner is ALWAYS an option but can take time if these partners are not known to you personally. 

I can do the project in phases, but I am in for quite a bit already, the land acquisition, engineering, architecture, horizontal construction for utilities, water retention and so on.  I have more in the early stage than I will in any individual unit.

The insurance is pricy as well. I don't think the SFH or townhouse insurance was all that different in cost. I know that 20 is the magic number for increase underwriting.

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Originally posted by @Lesley Resnick :

I can do the project in phases, but I am in for quite a bit already, the land acquisition, engineering, architecture, horizontal construction for utilities, water retention and so on.  I have more in the early stage than I will in any individual unit.

The insurance is pricy as well. I don't think the SFH or townhouse insurance was all that different in cost. I know that 20 is the magic number for increase underwriting.

its the insurance for the GC which is costly and then passed on to you and the developer.   if all those improvements are paid for then you probably have sufficient equity for the vertical.. I would be going to a local community bank  that does small time construction loans.  A bank where you walk in and talk to Senior people if not the bank president and the head credit officer.  These banks charter is to help local business people  ERGO community bank.. just have to find one that will do spec lending not all will.  But the fact that you can rent them they may look at it as a MF loan.. what I see for MF loans is land has to be paid for and then the bank will do 75% of the vertical.. so you need pretty good amount of cash into those deals. 

Right now in the markets I am working in Orlando  Charleston and Portland.  owning the land free and clear is enough equity for the horizontal AND the vertical no further cash needed.  rates are 1/2 point to  1 point  5%  interest on drawn funds. NO junk fee's just appraisals. For your development they may want an MAI.. I use an MAI on my bigger projects.. we have to appraise the dirt first then we do each house.. we are able to just do one appraisal per floor plan so we only have to buy 5 appraisals for the 60 lots. 

Each market is unique though that is for sure. 

I will give the local banks a try again.  Historically it has not be very fruitful to try and work with the local banks.  They have been more conservative than the larger banks.

GM. I also am in the preliminary phases of building 11 units in Concord, NC. 3 Br/ 3Ba units which will be comprised of 3 separate buildings on lot. ( 4,3,4). Currently, I have an SFR on the property and own the house/property outright and it is currently rented. I have begun Civil/Architectural planning and meetings with the TRC. I have no development experience however have a large portfolio of homes in the Charlotte suburbs which are solid performing assets and have done extensive rehab's on many properties from basic new kitchen/ba reno's to full structural/electrical/plumbing renovations. My current lendor has policy which stipulates a partnership arrangement with a GC/Builder on my new project to finance the deal. However I am not comfortable with that arrangement. I would appreciate any insight in obtaining financing on my project. Again there are no encumbrances against the property and I will be financing the impact fees and civil/architectural fees myself. I would need financing for the vertical build-out.

Originally posted by @Ramak B. :

GM. I also am in the preliminary phases of building 11 units in Concord, NC. 3 Br/ 3Ba units which will be comprised of 3 separate buildings on lot. ( 4,3,4). Currently, I have an SFR on the property and own the house/property outright and it is currently rented. I have begun Civil/Architectural planning and meetings with the TRC. I have no development experience however have a large portfolio of homes in the Charlotte suburbs which are solid performing assets and have done extensive rehab's on many properties from basic new kitchen/ba reno's to full structural/electrical/plumbing renovations. My current lendor has policy which stipulates a partnership arrangement with a GC/Builder on my new project to finance the deal. However I am not comfortable with that arrangement. I would appreciate any insight in obtaining financing on my project. Again there are no encumbrances against the property and I will be financing the impact fees and civil/architectural fees myself. I would need financing for the vertical build-out.

Partnering with a GC is a new one on me. Would a token amount (1%) satisfy the requirement?

It may be time to find another lender.  Lenders are challenging to begin with , adding new to building will make them even more nervous.