Development Loan Points on 2M+

8 Replies

I have a Multi-Unit Townhome project that was originally plated for 170 lots. Utilities are in, phase one of the roads, curbs, gutters and water retention has been completed as well.

I have received approval from the municipality to build the project as duplexes that will optimize cash flow and raise the number of finished units to approximately 300.

I owe 1.25M and need 1.05M to finish the roads, curbs, gutters, and water retention.

The first lien(1.25M) is overdue and was intended only as a bridge.

The finished value of the subdivision would be 3.4M -4.5M as finished lots, depending on the comparables the appraiser uses.

I have also found a lender that will lend to take the first out, but his points are high, it's not hard to get very expensive in points on a loan size like this.

I am outside the Phoenix and Tucson markets in a smaller but rapidly growing area. Given my area, it has been tricky to find someone that will both lend in this setting, especially in these amounts, for infrastructure, even with the equity intact.

Does anyone know of a someone who may be able to touch a project like this?

As an aside, I will need additional funding to build the project 100+- units at a time. It's funny, but I have quite a few lenders that will lend on that project :). In a perfect world, I would love to find a lender that can do both.

Thanks!

dirt loans are tough... you can figure on 4 and 12   to 4  and 14 anything less is a good deal.

so finished lots are only worth 20 to 25k ??? we cant even build the lots for that amount even close.

should be a winner.  I would not get hung up on fee's to get the loan.. you need to do what you need to do to get to the point you can get vertical.  cheaper than bringing in a partner.

Originally posted by @Michele B. :

So, total what are you looking for? and what rate is acceptable. How long have you been in this business?  Please tag me .

 Looks like he needs 2.4 mil  first is over due as he said and he needs 1 mil or so to finish..

these are tough loans as you know.. I get them from my commercial bank at 1 point and 6.. but I had a bigger deal were I needed 7 mil and went shopping private and 2 and 12 to 4 and 14 is what I found for a dirt horizontal loan... but my bank came around and is going to do It for me.. 

Hey All,

I currently owe 1.25M(which is overdue). To complete all the horizontal I need another 1.05M. Total loan amount to get to finished lots is 2.3M+-. 

@Jay Hinrichs I appreciate your candid feedback. I would love to be at 1 point and 6% on a deal like this. How long did it take for you to get a good enough relationship with your commercial bank to back a deal like this? I usually have 5-6M out on Fix and Flips and New Construction at any one time, so getting to a lower cost of capital would be really big for my business.

Originally posted by @Austin V. :

Hey All,

I currently owe 1.25M(which is overdue). To complete all the horizontal I need another 1.05M. Total loan amount to get to finished lots is 2.3M+-. 

@Jay Hinrichs I appreciate your candid feedback. I would love to be at 1 point and 6% on a deal like this. How long did it take for you to get a good enough relationship with your commercial bank to back a deal like this? I usually have 5-6M out on Fix and Flips and New Construction at any one time, so getting to a lower cost of capital would be really big for my business.

I have a 25 year relationship with my banker who is the head of all lenders for his bank its a 5B bank.. took me about 10 years to get to the point I got significant LOC's with them and like you I run between 5 to 10 million out with them.. for new construction development extra.. it makes a HUGE difference I can tell you.. and I had 30 million out with them that I used to loan to flippers and I made the delta.. that was in my HML company and that was 5 different banks all same facilities.. But to be fair and balanced I was not able to get a horizontal loan from them until 3 years ago and I was the first one they had made a horizontal loan to since 2005... :) that's how tight those loans are .. now vertical plenty of players back in that space.. and you can get 1 and 9 from West coast lenders on vertical HML s

@Austin V. Coming from a lender who places out of box deals, I'd take the expensive terms.  I know that you're going to be able to get the construction financing and the cost of money and length of outlay probably won't mean much even if you're paying 12-14% as @Jay Hinrichs pointed out.

Plus it's above most lenders comfortability on land even if you have the takeout. I just placed a first lien at way lower LTV on develop-able lots in my own backyard near Sacramento and it was 6pts/11%. Experienced and decent borrower too who actually got a CA bond to pay for the horizontal improvements. The money I got him was float money during the process.

If this was in a major metro in AZ, I'd say to PM me, but I'd go with who you've got or maybe contact American Life Financial (notsohardmoney.com) and see if they are a play.

Originally posted by @Jared Rine :

@Austin V. Coming from a lender who places out of box deals, I'd take the expensive terms.  I know that you're going to be able to get the construction financing and the cost of money and length of outlay probably won't mean much even if you're paying 12-14% as @Jay Hinrichs pointed out.

Plus it's above most lenders comfortability on land even if you have the takeout. I just placed a first lien at way lower LTV on develop-able lots in my own backyard near Sacramento and it was 6pts/11%. Experienced and decent borrower too who actually got a CA bond to pay for the horizontal improvements. The money I got him was float money during the process.

If this was in a major metro in AZ, I'd say to PM me, but I'd go with who you've got or maybe contact American Life Financial (notsohardmoney.com) and see if they are a play.

did they float a mello Roos ????  I did the first one of those in Nevada county in the day... they take time and are expensive but that's how its done in that neck of the woods.. I have also done 1911 act bond issues and 1915 act.... unfortuanly most place's they wont do that for private developer.. ergo development can really get stymied and its been a free for all for the big corporate players who have wall street cash. 

@Jay Hinrichs ..Not Mello Roos, but the city is doing an assessment district; pretty much the different medium, same thing.  It's in Yolo County and basically my client is just finishing his own subdivision plan from 1920 or something (the subdivision he's completing is literally across the street from his primary residence).   In the process, he's figured out he can use a CA Statewide Community Infrastructure Bond to finance the horizontal (SCIP).  Pretty interesting - his project is one of I believe 20 in the area and the bond is like $45MM or something like that.