All Forum Posts by: Matthew Heimann

Hey Bigger Pockets, my partners and I work for a Design Build firm building 40MM Apartment complexes for other big developers and its time that we start developing for ourselves. Currently we have our eye on a lot that where we could build an 8-plex with a rough build cost of 1MM. Our biggest question is Capitol. Our initial thought was to leverage all our professional design fees as well as builder (GC) fees to put towards 15% down payment, but it appears we can not find a bank that will do this.

Our first question would be, have you heard of a bank that would have this type of creative financing? If so please message me!

Currently our team of (3) would be comprised of GC, Arch, and Structural and we would be equal partners. As we are finding that we cant leverage our fees, (which we would absorb into equity) as a down payment, we are looking at bringing in another partner who would supply the cash for the down payment. Our big question is how to structure this deal with a 4th partner. Would this 4th partner who brings the $150k be an equity or debt partner? Is there a standard set of terms? It seems that with this size of project we should keep the equity partnership as small as possible??? The one problem we see if they were a debt partner, how would we pull the equity out of a new build? Can we refinance and cash out on a new build?

While we have been in the construction industry for a while we are entering uncharted territory with the financial side of development. 

Any advice is much appreciated!

Hey Bigger Pockets, my partners and I work for a Design Build firm building 40MM Apartment complexes for other big developers and its time that we start developing for ourselves. Currently we have our eye on a lot that where we could build an 8-plex with a rough build cost of 1MM.  Our biggest question is Capitol. Our initial thought was to leverage all our professional design fees as well as builder (GC) fees to put towards 15% down payment, but it appears we can not find a bank that will do this. 

Our first question would be, have you heard of a bank that would have this type of creative financing? If so please message me!

Currently our team of (3) would be comprised of GC, Arch, and Structural and we would be equal partners. As we are finding that we cant leverage our fees, (which we would absorb into equity) as a down payment, we are looking at bringing in another partner who would supply the cash for the down payment. Our big question is how to structure this deal with a 4th partner. Would this 4th partner who brings the $150k be an equity or debt partner? Is there a standard set of terms? It seems that with this size of project we should keep the equity partnership as small as possible??? The one problem we see if they were a debt partner, how would we pull the equity out of a new build? Can we refinance and cash out on a new build? 

While we have been in the construction industry for a while we are entering uncharted territory with the financial side of development. Any advice is much appreciated!

Thanks!

@Zachary Giles

My wife and I are in the same boat. We are slated to be debt free in September and then it’s game time. We chose to be debt free before buying investment properties for a few reasons like peace of mind and increase of cash flow. Once our debt is clear we will gain 3k/month in cash flow.

Providing for a family vs being single definitely changes a decision. I say go after your debt then take on another property.

I love that area next to lake phalen. I was "driving for dollars" the other day over there on the st. paul side just south of where you are. Anyway here are my thoughts. Its too far from the U or any of the smaller colleges so i would say it would be very hard to get students. Maybe you could get some young professionals that work on the east side of the cities but that may be a stretch. you could find a big family but not sure how long you would need to wait for that to line up but i have seen it. If you could sell it for around 300k, that seems like a good flip to me that would probably be my choice. Another thing to think about is what your long term goals are and which decision better positions you for them. 

As a flipper/rehabber is this flip looking to be above or below par compared to your other flips?

Let us know what direction you decide to go! 

@Frank Maratta Ive worked on apartments that were costing for 130k/unit w/o land cost. that was in the midwest. I agree with @Eric Teran those are great questions. Id say start building relationships with a team of professionals, such as architects and contractors or even a DB firm in your area. is there a possibility to keep the same footprint, and salvage the foundation? 

@Neel Patel  It looks to be veneer brick but it is hard to tell by the pictures. But if so, it is most likely not structural. typically there is brick ledge of some kind or it even rests on the foundation itself. this looks like maybe the brick was not supported correctly. The step crack from the window is a bit odd, opposite of what we would typically see. If there are cracks in the drywall on the inside that correlate to the cracks outside, then there may be a bigger issue. The veneer should be repaired regardless so there is not water infiltration. It sounds like a good deal to me, but i agree have a structural engineer do a site inspection, its not much to get peace of mind. 

@Mark Petrovic

I do agree, that budget is really thin. I’m in the construction industry and we just wrapped up a 120+ unit apartment right around 130k/unit so almost double, now this did have parking underground which does add a bit. There is a possibility that you can do it for less but it might be a reach for this being a the first larger project. Keep exploring your options, but I do think some adjustments in the budget will need to take place.

@David Evans

I can second David’s health sharing plan. My parents had that for the past 30 years and was great. Their premiums and deductibles are a fraction of the cost of their peers their age.