OPM for purchasing land

2 Replies

Looking for suggestions on how to use other people's money to purchase land. Then have new construction built on it. ideally in a way that I can use the land as the 20 down after the construction loan is done.

@Aaron Oetting

Syndication is possible but the cost of setup to use the safe harbor Regulation D exemption from securities regulations is $10,000 and up. Further, your chance for a successful Capital raise is directly proportional to your track record in real estate deals.

Bundling construction debt on top of land acquisition debt was last doable in the mid 1980s and led to the destruction of the savings and loan industry.

Depending on the size of the project and the quality of your Rolodex, you may be able to raise funds by selling equity stakes to investors you have an established relationship with and forgo Reg D compliance, although this channel does not provide statutory defenses if your are sued by disgruntled investors. In any case, securing a construction loan on top of that is not a given as experience, track record, feasibility, profit projections, credit, net worth, personal liability, etc all come into play.

For as long as I’ve been in real estate ( 40 plus years) there has been a myth going around that in the commercial debt arena personal guarantees, credit, experience, etc aren’t relevant and that the “deal” stands on its own merits. The confusion arises because of the way very large real estate debt transactions are structured when the companies involved are NYSE or NASDAQ listed. For the individual investor, or smaller business, the “five Cs” are still dominant.

@Don Konipol   another spot on Post Don..  20% equity on a construction project is probably not going to do it

we are doing ours at 60 yo 70%  and sometimes 75%  however highly experienced and tics all the 5 c's