crunching new build numbers and financing

4 Replies

Hey guys, evaluating a SFR new build deal here in Nashville. This is my first new build deal.

I would finance the acquisition and construction of the property, partnering w/ the builder to split profits 70/30 me/builder, and also list the property as the agent.

I would purchase the land with hard money, then finance the project with a bank, splitting profits 70/30 w/ the builder. 

Question for new builds: Im putting 20% down for land cost (hard money), then 10% down for total project cost, yes?

For example:

If land cost is $50k and build/holding/etc. cost is $100k .. total project cost $150k

I would put $10k down for land, then bank would lend me 90% of total project cost--$135k. Yes?

Do I need to put 10% down for the project cost then?

This math is fuzzy to me

@Sean Kelly

Are you proposing that the land is purchased with hard money, and then the bank would have a 2nd lien on the property to finance the construction?  If so, I don't think this can be done.  Lenders don't generally like lending on land, and if they do, I've only seen them do 50% of the purchase price.  They can lend on the construction with pretty high leverage (usually 25% down), but I doubt on a 2nd lien.

Also, a lot of them require the borrower to have experience as a builder.

Hey Nghi! No im saying I would purchase the property hard money and finance out of it -- settling the hard money loan amount and moving the bank to the first lien, make sense?

@Sean Kelly

Gotcha.  So you're just seasoning your name on title with the hard money, and then refinancing it with the bank loan?  I'd be very careful with this approach and line up the back-end lender as well as the front-end lender.  I know people don't like to loan on land, so your down payment amount is probably going to be higher.

A 90% loan for a spec build seems awfully optimistic. Find a lender before you get too far into it.  Nor sure why you'd use the hard money first.

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