Need help with a project finance plan

[Jason Xenakis]

Hello. Thanks in advance for advice. This is only my second real estate deal. Plan is to form an LLC and buy land and build cabins for STR. The market analytics are good. I just need help as to what the best route of financing is. I have multiple investors who want to invest in this project (more than I need), but wanted to keep it small as it is only my second deal. Plan is to buy land ~$300k, build 3 cabins ~$1.2 million, furnish the cabins ~$100k (Total project cost ~$1.6 mil). We were thinking about putting down $600k and taking a loan out for 1 million. (LTV 62.5%). I believe this is a favorable LTV, but was wondering if I should be the sole loan guarantor as a GP (where the other partners are LPs)? Should I make the other LPs loan guarantors also if it is only 2 other people? How do lenders approach financing with multiple grantors on a loan? I am assuming it is safer for them and may improve rates. I am nervous that taking on more debt for progressively larger projects will impact me from accessing financing in the future. Should we use an investment mortgage? DSCR? For reference, my wife and I make about 6-700k on our combined w2 jobs, but we also carry an 800k note on our personal home and a 450k note on our first investment property that is cash flowing. Any advice would be appreciated.

[Patrick Roberts]

They wont be LP's for long if they PG the debt. 

This is a complicated scenario with a lot of moving parts. The entity structure, the collateral structure (multiple properties on one parcel vs separate parcels), the debt-service coverage, whether it's rural or not, whether these are classified as commercial vs residential all come into play. 

Rates should not be your primary concern on this. Most rate quotes will fall within a narrow range, and if 1/8th makes or breaks the project, then the margins are too tight. Focus on finding a lender who specializes in this sort of thing to consult and work with. If this will be one large project, this will most likely be a CRE loan and not residential DSCR. These underwrites are much more complicated than residential DSCR where the lender basically just looks at an appraisal, title, and a credit report.

I'd do some research on securities laws in your state as well if you havent already.