Financing land development questions

[Account Closed]

I've got a subordinate agreement on a parcel to develop into roughly 200 homes plus or minus and to be done In phases.

Have any of you done any JVs with dirt contractors or found a bank that will finance phases of the devolpment?

Getting very close to having entitlements wrapped up here and I'd like to start building homes once development is complete on the first phase.

[Jay Hinrichs]

Originally posted by @Account Closed:

I didn't think to presell the lots primarily because I want to build on them myself but I could probably fund the development by selling 20 of the 39 and still get my project going.

its very amazing that merchantable lumber hasn't risen with retail prices!!

U have to have platted lots to pre sell them.. you dont have anything to sell until you record your plat.. so unless your going to do lot line adjustment or just a lot split and sell off a phase your not going to raise cash that way.. you can have reservation that the bank will note as a good thing.

Reason bank wont touch subordination is they are not going to fund into a deal that has NO TRUE cash in fusion by the borrower simply does not happen anymore.. you need to pay cash for the dirt own it free and clear then your good to go thats how these deals get done generally speaking or you need to be a big client of said bank. with BIG deposit relationship.. Way too much risk for the bank.

the other reason bank will not go subordination route is it precludes a DIL in the event of a water landing. Smaller lots if they are full service IE water sewer power storm drainage are by far cheaper to build.. its all about road frontage.

From my cheap seats what I see lumber doing if  and thats a Big IF you cant raise the sale price of your new construction by 20 to 50k per door the price you pay for the dirt has to go down.. Or you wait out the lumber market with the hopes it retreats  thats a big if to.. supply demand is going to keep lumber high.

On the 90 home community I am currently building in Oregon we were able to do just that my 2000 sq ft home that was 550k is now 600k and we sold them all.. so its trading dollars and the hyper inflation has been pushed to the buyer we are still making our margins which are not as high as you state pretty tough for us to get that high but we get close..  So as long as there is this huge demand and low interest rates you will see prices that HAVE to move up for projects simply wont get built..    is my thought on the matter.