80% of Purchase price or 75% of Appraisal - Applying for a Loan
| | Thursday, January 15, 2004 @ 08:00 AM EST
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Contributed by: Gregg Fous
Gregg Fous Properties
Read more archived articles about Construction and Building
Thought I would share a wonderful bank meeting I had today.
I live and invest in South West Florida. Real estate prices are escalating extremely fast and this is a wonderful time to have property.
I had a meeting with my banker today to present him with my loan application for a new development.
For the meeting I had:
1. Executive Summary of the project – basically a snapshot of all major factors
2. A feasibility study done by a third party
3. A study by the Urban Land Institute showing the need for what I was proposing
4. A review of the land complete with surveys, environmental study etc.
5. A review of the product – with prints, elevations etc.
6. Demographics
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and traffic counts for the area
7. Resumes of key personnel
8. Marketing Plan
9. Financial plan complete with two phases of A nd D and Four contruction phases.
10. Tax returns and financial statements.
11. Copy of contract to purchase
12. Resumes of architect and engineers and subs
I have written in many of my posts about development loans. With good credit you are able to borrow 80% of you A and D and 100% of construction costs.
A and D costs (acquisition and development) include the cost of the land, engineering, architects, amenities building, roads, development fees, infrastructure etc.
Construction costs are the actual vertical costs of the buildings. The bank will loan 100% of this if you have 50% pre-sales.
The good news is that in the A and D phase the bank will consider 80% of the purchase price of the land or 75% of the appraised value. For this particular property I will pay $5400 per living unit for the land when I close. BUT…. I tied it up one and a half years ago at this price, but will not close until March 1, 2004. The current appraisal is $8000 per unit. This means I can either borrow 80% of $5400 ($4320) or 75% of $8000 ($6000)!
I word of caution. You cannot order the appraisal yourself. You need to get the bank to do this for you.
What a great case for tying up property with options and contracts.
I love this county!
Gregg
Note:
As always – if you have questions or comments – please check out my user profile.
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