New Condos and Land Permits

[Ben Mills]

My wife and I are looking for a place to live in Austin right now but with and investment mindset.  We've been talking with some friends in the same position we're in and we all have similar budgets and no one is in a big hurry to buy.  There are 3 sets of buyers and a 4th potential buyer all with a 500-600K budget.  Anyone familiar with Austin knows that isn't going to go very far in the right neighborhoods.  Long story short, the idea came up that we may be able to leverage our money as group to buy and a large enough lot that already is zoned for condos and find a builder and put up 4 new condos.  

I've not been able to find anything online about other groups doing a similar project if they weren't financing themselves 100%.  I have a few questions to try and find out if this idea is realistic or not and I'll include some relevant data points as well.

1. There are 4 different buyers all using bank financing with a total budget of about $2M combined.  

2. Everyone was already planning on putting down 15-20% when financing their individual purchase.  For a project like this would we need to put down more?

3. Will a bank look at this like an investment property even if the end game is us actually living in it?

4. I have VA loan eligibility, I know they do construction loans but given the fact it's a joint project would I be able to use it here?

5. Finding a lot that meets the criteria might be the most difficult part of the project.  If we find something that is SF3 zoned and 12000-15000 square feet, how difficult and time consuming would it be to get it rezoned for condos?

6. The neighborhoods we're trying to stay within are west of 35, south of Airport, and north of 290/71, north of Oltorf would be even better.

7. How long do you think a project like this would take?  Looking for a general range.

I welcome any and all responses to any part of this post.  It was an intriguing idea that got thrown out so I'm hoping it's possible to pull it off.  

[Jason Hirko]

Hi Ben, intriguing idea and I can't answer most of your questions, but the one thing I will throw out at you is that this would likely be considered a commercial loan by most lenders (but not by all) and a lot of folks who specialize in those won't do owner-occupied projects, as the disclosure and regulatory requirements of each don't always jive together. Just something to be aware of. Good luck and keep us posted on progress if you move forward.