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Updated over 8 years ago,
Hard Money for New Construction (Sort Of)
I've got a client with a property that has 3 exterior walls, floor joists, and semi-second floor joists and framing. Currently in court with the city because permits were never pulled to demo the existing sfh and add second floor. Foundation is solid. I've got the architect's drawings ready to go, we're about to pull permits, but I know they don't have the cash to get past tearing down the illegal 2nd story addition and closing up the second floor (ext framing, siding, roofing). They haven't been receptive to listing, but once the numbers hit them they might not have a choice.
Most hard money lending programs I see are for renovations. Although the city treats this as a renovation, its really new construction. To be efficient, we'll be tearing down all existing framing, reusing just the foundation and 1st fl floor joists. I think I can get it from them for 20k, but I might be able to work out a % of my profit at the end and transfer title to me for free. Construction costs with my full profit as contractor is @ 70k (so if I drop my profit that can go down), and ARV is $150k easy (I'm also a licensed real estate broker, comps line up).
At first, I was trying to line up financing for them, but 1. I don't know they'd go for it, and 2. it'd be better if I could just pay them to take over everything (if I can get financing). Reality is they'll probably never sell this property as-is for 20k, but due to my involvement I know all the details to justify that cost.
I'm looking for suggestions on if this deal could even happen, would anyone fund something like this in Illinois? Or would I need to try to push some sort of personal loan for cash from an acquaintance? I've got all the plans and proposals ready, and we're looking at about a 2 month turnaround to complete construction and 30 day max to get under contract w/ aggressive pricing, w/ 45 days to close. Lots of room for high interest, but my concern is both the appraisal of the as-is value and the new construction vs renovation factor.