Foreign Investor Looking to Build and Hold Loan

[Manolo D.]

Hello BP, I have searched a few threads but I couldn't find one that fits what we are looking for. A friend of mine from another country (foreign national) recently connected with me to research for him the possibility of building a duplex to 4-unit for his family and other family members to live in when they are visiting here, and the other to help with the mortgage, and expenses. He doesn't expect to gain money for it, but dreams to break even, and is even willing to spend negative cash flow. He is not your typical cashflow/appreciation investor, he just plays with money and assets. My friend owns and operates a construction company and has government contracts and owns a shopping mall, his contracts have an average of 1M and has an varies between 2-4 a year, foreign assets are around 2M.

So to wrap the story short: 1. He wants to build 2-4 units, use one as vacation house for family and friends, cash flow the rest. 2. He wants to buy the land cash and post it as collateral as best case scenario OR land + engineering & permit costs until everything is ready to break ground (ie a day before demolition/foundation works start) as worst case scenario (say 100-150 land + approved permits). 3. He wants a construction loan, and at the end of the project, turned into a 30 year mortgage (not sure if he could avoid closing costs, but for sure he could avoid selling agent fee). 4. He expects the land plus construction savings (through me, I offered 30k construction management with at-cost reimbursement), to bring total equity of 35-40% from arv (sample computation below). 5. He has a limit of 250k to spend before breaking ground.

What is his best options? Do you know any lenders that I could inquire about this? Any ideas on how we could tackle this issue? The construction will be done in Southern California.

 (ie if the total arv for 3 unit is 1.3M, and he spends 450k on hard construction cost, 250k in land and permit, plus lending + closing & etc costs 100k for a total of 800k, his equity will be 500k out of 1.3M or 38% - just assume everything is correct)

Thank you all.

[George Krajacic]

I am located here in southern California and I am curious which cities are you considering for the project. If you can share that information I might have some suggestions.

George Krajacic