All Forum Posts by: Brandon Nappi

My partners and I wanted to pose this question to BP as we're going back and forth with no resolution - we're hoping for some outside advice.

Very basic understanding of the structure of our partnership is:

A - 45% investor

B-  45% investor

C- 10% investor (but has the background, skill set, and licenses to find/analyze the properties, negotiate, purchase, and is the local boots on the ground).

These properties will either be fix-flip or long term holds (utilizing management companies).

How would you split the profits if not being reinvested?  40-40-20%?  33%-33-33?  

Thanks!

Thanks @Andrew Turner

About to purchase a lot and build new construction as an investment/vacation home, looking for someone to work with that understands the process.  Please shoot me a private message if that is you.  Thanks!!  

Thanks @Charlie Fitzgerald that makes a lot more sense.  Have a good day!

Thank you @Charlie Fitzgerald

So, "Your loan balance will be the amount of money paid out by the lender to the contractor that built the house ($350,000). Your down payment will be any costs you paid out of pocket (soft costs) and the value of the land ($150,000) (provided you owned it free an clear.)

For simplicity sake, let's not factor in soft costs right now...

My loan balance would be $200,000 in this example?   

Please feel free to explain this like I am 5 years old.  

Thank you all for your previous answers, maybe I need to ask the question a different way to help me understand?  

I own a parcel of land = $150,000

Construction costs will be $350,000 for a single family home

When this construction loan is converted to a permanent mortgage, how does the bank determine my loan balance?   I plan on using the land as my downpayment.    

Does the permanent mortgage pay off the construction loan and then my perm loan is based off of the appraised value (lot + improvements) or is it based off of construction costs + lot?

Or now that construction is complete and I own the land, do I just refi to get a better interest rate on the construction loan?  

I cannot wrap my head around this.....

Thanks!

Thanks @Scott Carder

Just to clarify - if my land was worth $175,000 the permanent loan would now be $325,000.   Correct?

Would someone please help me out on how these deals are structured.   Thank you!

We own 100% of the land - $150,000

Construction Costs - $350,000

Let's just assume the market value after completion is $500,000

So, the construction portion of the loan is $350,000 and I will pay monthly interest payments until the project is complete.  Correct?  

After construction is complete, can I use my land as a downpayment?  What would our mortgage payments be based off of?

Is the "perm" loan now $500,000 (improvements + land) with a downpayment of $150,000?

Sorry, really confused....

Thanks in advance for any help!  

@Russell Brazil you nailed it - while I know this site is dedicated to REI, this is a house for my family. A house that that we love. In a location that can't be duplicated. So, it's not like I can just go down the street and find the same property. Therefore, we are willing to pay a premium and over market value, if need be (which kills me to do, as a REI).