Need help: How would you structure this deal?
Hi BPers,
Haven’t been here for a while, so glad to see there are so much things going on here. I'm a flipper also done some new development work. Need some help for this deal structure?
It’s an infill land development deal in bay area. Good neighborhood.
I had it secured 12 months ago, it can be subdivided into 3 lots(takes about 1 year). The local single family house market has appreciated 10-15% over last 12 months.
The numbers are like this:
-Land: 2.65M
-Soft cost: 300k
-Public work and utilities: 210k
-Hard construction cost: 2.86M
Total before construction: 3.16M
-Construction loan: 2.86M
-Loan interest: 229k
Sell at 8.8M
-Selling cost (commission): 396k
-Gross profit: 8.8 – 3.16 - 2.86 - .229 - .396 = 2.15M
ROI 2.15/3.16 = 68%
Total project length is about 2 years. 12/12 for entitlement/construction
My role:
- I secured the land one year ago, put in 220k deposit and 30k for some prelim work and due diligence.
- I will raise all the money,
- I will manage from start to finish, I also have a GC license but will only charge a minimal project management fee.
How would you suggest to structure the deal between me and my passive money partners? Also how to factor in the land appreciation in this deal? I believe the land is appreciated 15% minimum for the time I hold; there is rarely any land/lot on market.
Thanks a lot.