All Forum Posts by: Dave Petes

@Jared Rine The proposed project is a hotel. I didn't see the need to include the stabilized value considering as you mentioned, construction loans and down payments are driven by the LTC. STR reports are looking great due to the strong recovery in this specific market area for hospitality, so I don't foresee any issues regarding the take out loan which will be based on the LTV.

Let me know what sort of information you’re looking. I’d appreciate any input.

I’m in the middle of completing construction documents and wanted some input regarding capital planning before reaching out to lenders again.

Preliminary history:

Land originally bought vacant and with no entitlements for $1,500,000 (free and clear).

Entitlement planning costs: $250,000

Construction Documents costs: $350,000

Total All-In Expenditures so far: $2,100,000 (land + soft costs)

After obtaining entitlements and general market appreciation, the value of land is indicated at roughly $2,500,000

Basic Rough Math (not actual numbers):

Cost of Construction: $10,000,000

Market Cost of Land (free and clear): $2,500,000

Total Project Cost: $12,500,000

Financing Needed: $10,000,000 (assume all FFE, interest reserves, contingencies, hard costs, etc. are included)

Financing Assumptions:

Loan to Cost: 85% (SBA)

Maximum LTC Loan Amount: .85*$12,500,000 = $10,625,000

Equity Required: 15% = .15*$12,500,000 = $1,875,000 (Equity in land exceeds this)

Actual LTC = $10,000,000/$12,500,000 = 80%

Based on early conversations with a lender, they indicated a cash injection would still be required.

The main question is, does the equity in the land not cover the full equity/cash requirement? If not, how much of the equity in the land can be attributed towards the 15% equity requirement?

Based on the potential cash injection requirement, I’d assume the market value of the land and costs incurred so far might only contribute some percentage to the equity requirement. Anyone have any insight of how much additional cash should be expected for commercial deals in this size range? Back-of-napkin calculations or metrics will help too!

As with S-corps, I pay myself an industry average salary for my position (W-2 wages). Due to a downturn in business, we’re contemplating claiming unemployment. With our W-2 wages, is the right path to go through traditional unemployment or do we have to wait for the new Pandemic Unemployment Assistance (PUA) process for business owners and self-employed.

@Kyle J. @John Moore

Essentially follow Kyle’s post. If there’s no specific definition of rent and no local ordinance that includes utilities and fees within the definition of rent, then increase the rent by the allowed amount and then add a parking fee, utility fees, etc to cover the market-rate difference. Need to consider that if the tenant says no, you can’t evict right now and best to consult an attorney regarding the increases.

@Kayla Utley

The deal seems like a bust. Best case scenario, the neighbor is nice and an encroachment easement or sale is obtained without cost gouging, worst case the neighbor finds out and demands correction by removal of encroachment. If you’re curious, look up adverse possession regulations in your state so you’ll know what kind of situation your neighbor is in.