All Forum Posts by: Craig Grella

FHA and VA loans can only be used for owner occupied transactions, not investment property.

USDA loans are subject to many rules and conditions and are used in rural development areas and areas where significant job creation would result from the development. You can find more info here: http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do.

Pre-construction is exaclty as it sounds, before construction. Generally speaking that means everything up and until vertical construction starts.

Developers buy tracts of land, subdivide, develop horizontally (build roads, install utils,etc.) and then put permits in place to build homes. They can either build homes themselves or sell the lots to individual builders to go vertical.

Everything up to this point is considering pre-construction.

This is the time when builders would typically solicit end buyers. In many cases their lenders would require that a buyer be in place and the property be pre-sold before the builder could get the financing needed to construct the home (go vertical).

In some states, massive tracts of land were developed and pre-sold, but before the homes could be built the developers went out of business. Buyers were stuck with undeveloped land, unfinished homes, or homes that are worth one tenth of what they paid for.

If you're considering pre-construction, make sure you do the following:

- check developer/builder/seller references
- check to make sure project is licensed, permitted, bonded, approved, etc. - if it hasn't been approved by city yet, walk away
- check to see if developer has skipped out on deals in the past
- make sure builder/developer has lined up financing for the entire project, not just your home. if they're counting on you to get financing for a custom home, make sure you're not the only one signed on yet in the development.

Good luck.

So much to consider when looking at land, but PNW hit some great topics on what to look for. In terms of value, most professional developers use the land residual method. The idea is to take the value of the land's highest and best use and work back from there.

For example, a piece of land that is zoned multifamily might allow 10 units of apartment. A new 10 unit building, fully rented might have a value of $2 million (i'm making these numbers up for sake of example). Let's say it would cost $1.2 to build that apartment building and another $300k for permits and horizontal development. That's a total construction and development cost of $1.5 million. One could say they wouldn't pay any more than $500k for the land ($2 mil - 1.5 mil cost) = $500k. In reality, they'd want to build in some margin of profit for themselves, so you'd pay as much under $500k as you could get the seller to agree to.

One of the better books i've read on the subject of land development has been used by grad students for years in real estate courses around the country. THe land Development Handbook by the Dewberry companies. Amazon link is here:http://www.amazon.com/Land-Development-Handbook-Dewberry-Companies/dp/0071375252

Urban Land Institute also put together a great handbook for land development toward residential homes here http://www.amazon.com/Residential-Development-Handbook-Uli/dp/0874209188.

Good luck.

There are a few sites to check out for business grants. There are few for real estate related activities, unless you're a non-profit developer, but it's worth looking at their sites.

Try these:
grants.gov
business.gov
businessgrants.org

You can also link over to an article i wrote which has a few related articles on grants and micro loans. Even one from Guinness Beer to help new businesses. That one can be found here: http://www.examiner.com/x-22012-Seattle-Small-Business-Examiner~y2009m9d25-Obtaining-a-small-business-grant.

Good luck.

If you're numbers are right you shouldn't have a problem getting the 70% you're looking for. With a 10% cap rate you're still looking at a value north of $200k. However, until you lease it up, it's not worth that because there is no income stream.

MOst commercial financiers will want you to first lease the building up before they loan on it, especially if it is vacant now.

It will be in your best interest to do that as well, as you'll get premium financing that way.

If you finance it while it's vacant the loan will not be as good, plus the lender will take out too many concessions. They'll use huge operating ratios, larger than normal vacancy ratios, a high per unit management fee, etc.

If you hold for a few months and lease it up you will be able to show real, historical numbers which they will use in their underwriting, rather than their best guess estimate. The appraiser will confirm those numbers with rent estoppels which will make the lender feel more comfortable about the income numbers.

The one drawback you'll have is the low loan amount. Anything under $250k will deter most commercial conventional lenders who have the lowest rates on smaller commercial.

You'll probably need to take it to a local community lender, credit union, or small savings and loan in your area.

Peter's post is spot on with value, if the numbers are right. It seems odd this would be selling where it is, essentially a 24% cap rate. Who would give up that kind of investment. It's unheard of. In my opinion, if it smells off, then it's probably off.

Even discounting the numbers of the deal, section 8 housing is another thing that can take some expertise in managing.

If for some reason you can't let it go, take corey's advice and get a knowledgeable friend to check it out with you. Maybe a contractor, or better yet, someone who's managed section 8.

Most small lines will be tied to your personal credit as well as business. It's not until you step into higher amounts and do more business that most banks will offer unsecured lines tied only to business activity.

With that said, a line will report just like a loan, as a tradeline on your credit. To really build business credit, you'll want to setup accounts at D&B and other business reporting sites.

As long as you run your business activity through a legal business entity other than your SS# (sole proprietorship) you should have no problem showing profitibility and therefore no problem increasing your lines of credit tied to the business.

The unsecured nature is a different beast though. Many banks now are going back to the tried and true underwriting methods which include getting security for their lines and loans. The best way to get an unsecured line or loan for your business is to have revenue that supports that line and assures the bank you'll pay as promised. That takes time and business activity.

Until then, a better use of your time is getting whatever credit you can, personal or otherwise, using it wisely and building your business.

-Good luck.

You can always do it the old fashioned way...go to the recorder's office and look through default filings.

Or if you can prove you have the cash or connections to deal, call the local commercial banks and ask them what's on the chopping block. If you're money is real, they'll send you everything they have.

-Good luck.

Josh has a great post. Many business owners and rehabbers struggle with credit options, not realizing that almost all banks, especially local community banks offer small personal and business loans backed by deposits.

Since it's a small amount you may go through that money quickly and need another small loan once it's been paid off. In that way you may incur fees for opening and closing several loans. You may want to look into getting a small business line of credit with that money in deposit as the security for the line. Even if its just a $5,000 line you will only pay fees once to open it, then you can charge it up and down as you please.

Good luck.

If your offer was submitted on a contract standard for your area, like an MLS contract the assigns language may already be in there. Read through it to see if it is. If so, you can use an assignment contract between you and the new buyer you found. It will have to specify that he will perform according to the contract you have with the seller. You can pick these up in any one of many real estate kits or just use a local attorney.

If the assignability language is not in your Purchase and sale agreement you'll have to add that in an addendum somewhere in the contract, which since it has already been accepted, it will need to be reviewed and initialed by the other party.

This may raise a red flag since the offer has already been made and accepted. If its still early in the process you should be able to explain that away without any trouble.

Good luck.