How to best leverage outside capital investment?

10 Replies

Hey all! Good morning!

Would anyone have any "outside the box" ideas on how to best leverage my first investment of $250,000 being applied to a tiny house development in the Denver area?

I know it's not going to be enough to get the development up and running, but a great start. Any thoughts or suggestions?

With humble gratitude,

Joe

Originally posted by @Joe Callantine :

Hey all! Good morning!

Would anyone have any "outside the box" ideas on how to best leverage my first investment of $250,000 being applied to a tiny house development in the Denver area?

I know it's not going to be enough to get the development up and running, but a great start. Any thoughts or suggestions?

With humble gratitude,

Joe

Joe,

I am confused. It might be me.

You are investing $250K into a project. Do I have that correct?

What will the GDV (Gross Development Value) be of the full project when everything is built out? 

Are you the developer or just a passive cash investor? 

I'm receiving an outside capital investment of $250,000. I know my project will take significantly more than that and I'm looking for options on how to best leverage that for the purchase and development of a vacant piece of land, yet to be identified.

@Joe Callantine , You would probably need to look at either bridge loans or mezzanine financing. However, you will need to look at what your total cost of development will be. What is required by the state, city, & county for this type of development? If using municipal utilities what the cost to hookup and run all the lines will be. Are there impact fees associated with each buildout? Permitting fees required at each level. Fire department requirements for hydrants and what the cost is. Cost for roads and drainage within the development. This is just a few of the items required to look into to get your total cost of development. You may be best served by going to seek the advice of a developer or builders association in your area to find out what is required in your area.

@Jeremy Holcomb - I understand all of that and have been rounding up those numbers. I'm anticipating a little over $13,000 per location. I've been working on this for the last year and a half. Getting a county on board, engineering firm, conceptual design, etc etc.

I am trying to become the developer of these types of communities. It has been suggested that I get in with the home builders association, even though I'm not planning actually building the homes specifically. It has all been a process and there are many, many things I don't know. I'm an electrician by trade, trying to sort all this out.

Originally posted by @Joe Callantine :

@Jeremy Holcomb - I understand all of that and have been rounding up those numbers. I'm anticipating a little over $13,000 per location. I've been working on this for the last year and a half. Getting a county on board, engineering firm, conceptual design, etc etc.

I am trying to become the developer of these types of communities. It has been suggested that I get in with the home builders association, even though I'm not planning actually building the homes specifically. It has all been a process and there are many, many things I don't know. I'm an electrician by trade, trying to sort all this out.

I'm following this Joe.  I don't know the first thing about what you're doing or even how I'd get started if I were to tackle it, but I like the fact that you're putting in a ton of legwork and study and you'll eventually get it done.   Like us with our first rental.  Keep it up man!

Thanks @Doug Pintarch ! I'm really trying to help the tiny house movement become an industry. I'm partnering with major leaders in the movement working to normalize and standardize tiny houses as true living structures. It needs to happen. Nailing down capital is the hard part, because this is not a 3x, 5x, 10x ROI. It's about livelihood and helping people who choose the #TinyLive to live within their means by their own choosing.

@Joe Callantine , so take your numbers to mezzanine financiers and also look into getting a bridge loan. Take the money you have and either use as a down payment for the land or funds to use as you develop the property. It all depends on what the lenders require to help you complete the deal. Once you complete one development successfully then use that to showcase to start building other developments. Also to calculate a GDV is figure out your costs and  add your conservative profits figure together to get a ball park figure of the total value of the development.

@Jeremy Holcomb , YEP! BUT doing any type of traditional style lending usually means monthly payments. Revenue will not start until the community is up, running and people living in it. I can not, personally, swing that type of payment on my own employment income.

@Joe Callantine  typically with mezzanine you can arrange no payments until project is complete and sometimes a private bridge loan lender will do the same. I always tell people that you can always find a lender whose ideas align with yours, it just takes a little more work to persevere. That’s what I would look for in your case is a lender who loves the tiny living movement and is willing to help support it. Have you approached any of the finance companies for tiny houses about your concept/development. The person who runs one of those companies would be my first call. If they won’t do it they may connect you with someone who will. 250K is quite a bit of skin in the game as they say.