Spec builder wants to build on land I own ... Pay me in a year.

[Todd W.]

Spec builder wants to build on an expensive ski lot I own. He is willing to pay full price (even 5% over price in a year), but give me nothing today. He wants to take my lot with what I guess is an option, along with getting a construction loan to build on. His plan is to build a spec home on my lot, sell it within a year and pay me off.

I asked if I would be in front of or behind the bank ... and as I thought he'd say ... I would be behind the bank in terms of loan position. I said that I wouldn't do this deal if I weren't covered as far as either his mistakes, market timing, other myriad things that could go wrong; he seemed to think this could be overcome. Is he crazy to say this can be overcome to protect me? Has someone done something like this and have advice on how it could be structured to protect my downside? I am not interested in losing this property due to a deal gone south.

[Jay Hinrichs]

short answer you CANT  highly risky.  for this situation you should get full market for your lot and 20 to 40% of the profit on top  or sell your lot for 100 to 200k more than your asking.. I assume this is a multi million dollar deal.

the builder of course NEEDS YOUR equity to get his loan.. now the good news is if he  can get a loan means he is somewhat to fully qualified.. 

you can do a participation mortgage in second position calling out for an interest rate and a bonus you just put it right in the note.. or 

lets say your lot price is 500k.. you simply write your note for 650k plus interest.. this assure you of profit.

I would not do this though if you have no means to step in and complete or cash out the first.. nothing is worse than taking over a build project from a builder that failed mid stream