New Home finance Question

[Steven Di]

Trying to build my first spec house and have some financing questions. It is a unique scenario.  I have the opportunity to purchase a half-built project (about 1.75 mil has gone into the build so far -5200 sq ft house) by a renowned architect on 20 acres. I will be able to purchase before it goes to market as it has just come out of a long legal dispute. The price with the 20 acres is 900k (land cost only) which I will buy cash. I have someone who wants to purchase 10 of the 20 acres for 400k so I will be in with 500k. The house will cost 2mil-2.4 mil to complete. I plan on taking out a hard money loan for this. Upon completion if the house appraises for 3.5 mil (conservative) am I able to get a heloc to pay off the hard money loan and what would my mortgage end up being if all this works out as planned?  Thank you!

[Greg Dickerson]

Originally posted by @Steven Di:

Trying to build my first spec house and have some financing questions. It is a unique scenario.  I have the opportunity to purchase a half-built project (about 1.75 mil has gone into the build so far -5200 sq ft house) by a renowned architect on 20 acres. I will be able to purchase before it goes to market as it has just come out of a long legal dispute. The price with the 20 acres is 900k (land cost only) which I will buy cash. I have someone who wants to purchase 10 of the 20 acres for 400k so I will be in with 500k. The house will cost 2mil-2.4 mil to complete. I plan on taking out a hard money loan for this. Upon completion if the house appraises for 3.5 mil (conservative) am I able to get a heloc to pay off the hard money loan and what would my mortgage end up being if all this works out as planned?  Thank you!

First you do not want to use hard money. Next you should not pay cash for the property at this point as there is a lot of due diligence you need to do before you close on something like this. Make sure to check with the local municipality first to check on permits, zoning approval and to make sure you can subdivide. You can easily borrow form the bank if you have strong financials and good credit.