Spec home build lending

[Rick Soto]

We were recently approved by the bank to start our first spec home project (we have done it many times for other investors, first time doing the whole deal on our own). The home will be around 1800sqft 3/2, we are estimating 180k-200k in construction costs plus land, which was 22k for 1 acre, land was preowned. Homes with these specs sell for around 310k in our market.

The terms the bank is offering are

Loan Amount $140,000

• Term 18 months
• Rate 8% adjusting every 6 months
• As proposed appraisal to support a 70% or better loan to value
• Estimated closing costs of $8,223.

What do you guys think of this financing deal?, and what should I be looking as far as net profit margin on a build like this?.
Also, as I build up my credibility as a builder, what is the best financing structure I should be asking for from a bank?

Thank you!

[Jay Hinrichs]

Quote from @Jaycee Greene:

Quote from @Rick Soto:

We were recently approved by the bank to start our first spec home project (we have done it many times for other investors, first time doing the whole deal on our own). The home will be around 1800sqft 3/2, we are estimating 180k-200k in construction costs plus land, which was 22k for 1 acre, land was preowned. Homes with these specs sell for around 310k in our market.

The terms the bank is offering are

Loan Amount $140,000

• Term 18 months
• Rate 8% adjusting every 6 months
• As proposed appraisal to support a 70% or better loan to value
• Estimated closing costs of $8,223.

What do you guys think of this financing deal?, and what should I be looking as far as net profit margin on a build like this?.
Also, as I build up my credibility as a builder, what is the best financing structure I should be asking for from a bank?

Thank you!

 @Rick Soto Two quick questions. How long will it take to build? Are you able to build at ~$100/SF?

agreed we are at 100 a foot with just hook up fees and permits and framed house.. Its insane how cheap you guys can build in some of these markets.. Like Texas . But then again when I look at the quality I can somewhat see how.. At least in the build to rent stuff.

As for terms for a first time borrower those are EXCELLENT good job..