Condo and Housing Projects Have the "Coodies"
If you're a commercial real estate loan broker, you shouldn't waste even five minutes working on a construction loan request for a residential subdivision or a residential condominium subdivision right now. These deals are almost impossible to finance in today's market. In the minds of most commercial real estate lenders, such constructions loans have the black plague or the coodies right now.
If you're a real estate developer, and you are the sponsor of a broken residential condo project or a stalled residential subdivision, you are going to need more equity. You only have a few more months before the last of your interest reserve is consumed. Don't waste time trying to find some commercial construction lender foolish enough to add another 50 homes to the current glut of unsold homes.
Instead, focus your energy on finding some wealthy private investors to help you de-leverage your land. Maybe you could cut a deal with the bank that has the existing first mortgage. "I'll reduce your loan balance, Mr. Banker, by 50% if you discount your total loan by 25%." Then you could use this discount to attract a new equity partner.
Your sales pitch to a new equity investor might be: "If you bring in $250,000 in equity, Mr. Investor, the bank will reduce it's current loan of $625,000 to just $500,000 - and we'll pay down that $500,000 to just $250,000. Then my development company will pay you a preferred annual return of 14% in three years when the land is once again ripe for development."
So where does a developer find a private investor to help him carry a stalled residential housing project. You should try advertising on LoopNet.com. Call their advertising department and tell them what you're looking to do.
Do you have a residential subdivision construction loan that still makes sense in today's market? If so, you can submit it to hundreds of commercial construction lenders by using C-Loans.com. And C-Loans is free!
