Owner financing development

[Ronnie Giery]

I am trying to work a deal with a property owner where he still owns the property but I finance and build a new home on it and we split the profits. The deal is in Los Angeles. I'm trying to figure out the best way to make this work. Would I have to personally guarantee the construction loan? Has anyone done something like this? Looking for any advice! Thanks, Ronnie

[Billy W.]

In most Joint Ventures, the land owner will add the land into the deal as his equity share.  Typically, the land owner does not have the experience or the balance sheet to develop a property themselves and thus why they are willing to give their land as their equity percentage into the deal. You (or partners) as the Sponsor will guarantee the loan or put up enough money where you can get a non recourse or limited recourse loan.  More then likely you will be responsible for hiring the consultants, getting permits, finding the financing, construction, management, etc.  There are 1000 different ways to structure a joint venture.... who is the manager, who is making the development decisions during the project, who is guaranteeing, who is putting up the rest of the money after the land, are you going to allow the land owner to step up his land basis, what are your splits going to be, etc.