Development Project Financing Scenario

[Timo Repo]

I am trying to find optimal way to structure the following transaction / development project. I would prefer to run this project with minimal personal investment. This will be under LLC and I would still personally guarantee any conventional loans needed.

Goal: Develop high end single-family / vacation property

Location of property: Greater San Francisco Bay area

Purpose of financing: Land purchase and construction

Type of financing sought: Construction / Owner Financing

Estimated development and carry on cost: $1,700,000

Cost of Land: $700,000

Total Funds needed: $2,400,000

Money from Investors: $600,000

After repair value: $ 3,300,000

Seeking to finance: $ 1,400,000 - $1,800,000

Value of property at present and/or your offer price: $700,000 for undeveloped land. Power and water on street

Owner financing based on project schedule. Terms still open but something like this:

$100,000 upon signing agreement

$100,000 upon plans approved by the city

$100,000 halfway construction

$400,000 60 days after Certificate of Occupancy (We plan to sell before this comes due. We can always delay getting Certificate of Occupancy in case it won’t sell immediately)

Interest rate 1% paid monthly

Sponson FICO: around 800

Significant assets and high compensation. Home mortgage debt to income ratio around 30% but no other loans.

This will be fairly long project, somewhere between 30-36 months. We pretty much know that the permitting will take minimum 12 months including getting power and water on site. Given the owner financing schedule, all the planning and permits will be done very thoroughly because once permits approved, we need to make our 2nd principle payment. The idea is to use investor funds for the owner financing payments (1st $300,000) and then proceed from the sales to settle the final $400,000 due once the property is sold

1) Am I able to get construction loan for this type of project given the land is already financed by the owner?

If not, what has to be changed?  

2) If financing is available for this type of project, am I missing something here? Just seems too easy…

All feedback is appreciated

Thanks

Timo