Hard money lender

[Reginald Currie]

Hi Guys

I have an opportunity with a commercial lot where the previous owner has demolished the building. The lot is surrounded by two shopping centers that were built within the last five years and sits on the corner of a major highway. Does anyone know of a hard money lender that does lot loans? The lot is 4.83 acres valued at $700k. Contract is for 425k. Family is trying to get this done before probate. Any leads on a lender is appreciated.  

[Chris Martin]

Most commercial banks in this area are not willing to lend on land speculation. Perhaps they would entertain providing a term sheet if you have a great track record of successful development of similar properties. 

From a local bank's last annual report summary:
In general, construction and land lending involves additional risks because of the inherent difficulty in estimating a property’s value both before and at completion of the project. Construction costs may exceed original estimates as a result of increased materials, labor, or other costs. In addition, because of current uncertainties in the residential and commercial real estate markets, property values have become more difficult to determine than they have been historically. Construction and land acquisition and development loans often involve the repayment dependent, in part, on the ability of the borrower to sell or lease the property. These loans also require ongoing monitoring. In addition, speculative construction loans to a residential builder are often associated with homes that are not presold, and thus pose a greater potential risk than construction loans to individuals on their personal residences....

The composition of the nonperforming asset portfolio is dominated by the commercial construction and land development segment which represents 44.5% of the total nonperforming assets and individually this segment represents 35.0% of the nonaccrual loan portfolio and 74.9% of the foreclosed assets portfolio. This loan segment has been negatively impacted by the economic environment found within the bank's market area and the resultant diminished demand for the products of such development and construction projects. For the nonaccrual loans within this portfolio there is a continual process of review with regards to the adequacy of reserves and foreclosed assets within this category are continually reviewed and marked to market as required.

This commercial bank has had a falling loan balance on "Commercial construction and land development" for the last 5 years. This part of their lending is 60%+ less than 3 years ago. Their Nonaccrual loans as a percentage of outstanding loan balances is way higher than all other portfolio components. Their "Foreclosed assets" consist almost entirely of "Commercial construction and land development". Speculative land development is completely out of favor for this lender... and this lender's bias is not uncommon for this area. 

Not trying to be negative, but the reality is you need a really, really good presentation to get this in front of the right commercial bank decision maker.