4 Lot Subdivision Funding Strategies

[Edward Kozic]

I just received an email this morning so my numbers are rough, but I wanted to run it by the forum and get some feedback.

I have an opportunity to develop a 4 acre lot in Florham Park which is a highly desirable Borough in New Jersey. Brand new home construction for a 4,500 SF  5 bedroom home will sell for around $1.5M.  The goal is to purchase the single lot and then subdivide it into 4 separate lots.  I currently work for a civil engineering company and have a very good understanding of the due diligence and approval process in getting this done; however, the financial component is above my pay scale.  I do not have the expertise to build four homes; however, I would be able to subdivide this parcel and sell the four lots at approx $650K-$750K per lot to builders or someone who wants to build their own home. 

My question is what kind of financing would one pursue to purchase the 4 acre lot, ball park $1M plus the $50K-70K for due diligence. I have read a few articles and have seen there are endless strategies in land acquisition financing all dependent upon your personal equity and private financing but I was curious to see what worked best for you.

[Andrew Kerr]

@Edward Kozic - if you don't have the financial capacity to qualify for the loan, then find a money partner.

Talk with some local home builders to see what local or regional bank they use for funding their projects. Then look for a loan that has a lien release, so as you finish the development and sell a lot, they will release that portion of the lien and you would then pay off 1/4 of the loan from the proceeds.