Mixed Use property Acquisition & Construction Financing

[Shantanu R.]

Looking to acquire a mixed use property in Morris County NJ - this is will be demo & reconstruct property so once the property is acquired we will be applying for variance / permits etc. with the town that may take ~12-18months to get approved. The property currently has a month to month tenant; we want to continue with until we secure the construction approvals. Any advice on financing options here ? 

Current State : 25X100 Lot [1 Commercial Unit ]

Future State  :  2  Commercial Units with 3 residential 

If we acquire the property on a commercial loan & demolish the building  - The bank can/will call on the loan . We will have to secure construction financing later. Should we get bridge financing off the back ? [ but this will be expensive] . Please suggest any lenders who can help with such project here in Central New Jersey. 

Experience : Have done  2 residential construction projects but this will be our first foray into mixed use/Commercial.

Thanks

Shane

[Stuart Udis]

What you are seeking here is an acquisiton/bridge loan. Given the market conditions, you should have quite a bit of negotiation leverage with a seller.  Especially since I understand this project requires a variance. Why not negotiate a lengthier settlement period tied to the final apperovals? Even if you have to pay more for the purchase think about the costs of carrying the real estate while waiting for the approvals  (debt service, property taxes, insurance, maintenance for the in-place tenant) and the additonal finance charges associated with originating an acquisiton/bridge loan and then a construciton loan at a later date. If you can  originate your construction loan at time of settlement  with the approvals in hand you should come out ahead if the option exists. Ensuring the tenant vacates at time of settlement is the other important item to negotiate in the event you can negotiate a lengthier settlement period.