Take-Out Condo Financing - 50% Pre-Sold Required?

[Bryan Hancock]

I am looking at building 8 condos in Austin. The plans and specs are done from a project that got dropped post credit bust. I spoke with our commercial lender about this today and he is checking on take-out financing, but he thought that to get FHA or FMNA financing the buyer has to be buying into a situation where 50% of the units are already sold.

Is this accurate? Does anyone know the rules on this?

[Ned Carey]

I can't give you specifics Brian, but I do know from trying to do individual condos that Condo financing is very tough right now. FHA and other lenders are looking at occupancy rates, % of rentals and % of default on condo fees.

Also Condos have to be "approved" by FHA. The condo association has to be on sound financial footing and have appropriate reserves. This used to be a 1 time approval but I believe now must be re-approved every two years.

This link https://entp.hud.gov/idapp/html/condlook.cfm?CFID=14003261&CFTOKEN=27d925aa2cc4e5b9-8460C3C6-DCC2-4707-A9B7D85195EC53A7 may be a good start.

I know I am talking about loans for retail buyers and you may be looking for some type of bridge financing but I thought this might give you an idea about how the market is viewing condos right now.

Rather than building buying defaulted condo complexes may be a good strategy right now. - Ned