what kind of money can i use to finance my i idea

Question

I am looking to start up/ develop a multi unit in a great location just outside a prominent city. It will be executive housing fully applianced and furnished like a hotel. But how do i finance it?

Steve S. · Answer

There are new construction programs especially if you already own the land. The main thing would be is how much have you invested in what we call "soft costs". The soft costs are the plans, the renderings, the surveys, the permits, the constructions budgets etc... @Annette Ammarell I saw you mentioned something about a business plan. How much of that have you put together?

Annette A. · Answer

HI Steve, thank you for the info. so far I have paid for a complete survey and have $2,000 funds set aside- plus $500 a month that gets added every month to put towards other costs. I still need to do a soil test, get a plan in place and look into the permit. so yes i intend to pay alot of these upfront cost out of my pocket. And I will be going to an attorney to Inc. the business name and set it apart from my personal affairs.I am working on pulling together a business plan.. i have ran alot of general numbers for the area and talked to various people of authority. I am waiting on a comp from a local realtor for the area rent and for the potential value of the property after... to get a better idea. I am also waiting on a couple of cabin companies for some estimates before i see a contractor to compare cost and see what he can offer. Hopefully in the next couple of weeks i can pull more of it together and complete a more acuate business plan.:D I am excited with the people i have talked to and look forward to progressing further.I would appreciate any suggestions or info you may have to offer, and what options you may have.

Annette A. · Answer

thanks Ned. I can and will pull real numbers before as i build my business plan. I still have to talk to town code officer- last I knew and heard there arent much code in this town, evern the realtor said that. I still have to get numbers from the two cabin companies i have talked to... and a contractor to see what actual cost may be.. it may be that i can onlly start out with 2 or 3 and add the others later. That's ok too. I have a realtor pulling comps for me for the area... then i found this site and am checkiing to see if i am being realistic in thinking i can possibly get a loan to finance this deal. I am feeling good about all that i am hearing... and i appreciate everybodies take on it.

Ned Carey · Answer

Absolutely it will help. But remember banks will loan 75-80% on investment properties with actual numbers. If you are talking theoretical numbers. They are going to want a lower loan to value.The fact you own the land is certainly going to help.

Annette A. · Answer

exit route would be to do monthly rental and that for the area is around $1200. at the least of $900. x 4 = $3600. and as a straight rental the expenses would be cut as they would pay all utilitlies... so it would at least pay for itself... and i could if i wanted sell a unit for about $180,000. according to realtor. :/

Annette A. · Answer

Thank you Tammy. no its not for the Waterville area but near Augusta and short distance from hospital. I talked with a local realtor who gave me numbers, and i researched other like kind housing- as well as rental rate for the area in a new house with 3bdrms.

Tammy Richards · Answer

I am by no means an expert, but I am wondering how certain you are about being able to get the rents you are describing? While the Waterville area is economically stronger than much of central Maine, rents are very low - student housing is very cheap to find, there are nice condos in Waterville that rent for well under $1000, and to purchase a home in the area is very affordable. I understand you are looking at building "executive housing"; perhaps I am unaware of who the transient executives would be in the Waterville area who would be interested in renting what you describe? In any case, I recommend you really dig into how big your rental pool actually is, and carefully scout the competition that is currently renting to your prospective clients to make sure you'll make the cash you are estimating.

Annette A. · Answer

I am waiting on a quote on a cost of 4 cabins from two companies. It may cost any where between $175,000-295,000 for 4 cabins which would after have an increased value for the area to be in the park range of $500,000-$650,000. Wouldnt the income and the high equity help bring in financing?

Annette A. · Answer

Thank you Ned. yes it would be speculative. I do own the land which is worth about $42,000- 5 acres. Even if it was rented as monthly housing it would gain to bring in near $6,000 a month... as an executive housing it would/ could bring in $45,000-200,000 a year. even if it only rented at 30% it could bring in about $50,000 a yr.

Ned Carey · Answer

This sounds like a very speculative deal. Financing will be tough unless you have substantial cash to invest yourself. I would be going to local and regional banks and asking what they have in the way of construction loans.