All Forum Posts by: Ed O.

I'm working with a few regional banks and have always had really.good luck with them. 

Typically, we're able to finance 80% of appraised value, which ends up pretty good.  We get fixed rates from the day the loan starts until the end of the Ballon. If a bank tells they have to float the rate until completion and it's non negotiable, I'm definitely a non borrower with them. 

I did one time build a few that were at 80% of cost, which came out closer to 60% ltv... those hurt... 

We get interest only for either the first 12 or 24 months of the loan as well.

Rates recently have been between 7.79 and 8.19. 

@Robert Ellis

Can you tell me where the best national lender rates are at, and a guestimate on their fees on the loans? 

And to that point - any of the other 4 or 5  people actively doing build to rents that are on BP - what are you seeing in terms of rate and fees on build loans? 

Thanks for mentioning Easy Street - I'm always looking at and for more options. Their build rates are a full 3+ points higher than what I'm paying now. I'm guessing they've got to get some fees on the deals in addition to title fees to pay their originators. 

I'm in the high 7s now with no points on a 5 year balloon on build loans. The local banks I've worked with have been pretty quick. I do get your point about some local banks not being good - I've talked to a bunch of crappy ones over the years. 

@Roseann Koefoed

Do you mind me asking what the GC Fee runs? If it is consistent with the residential market here, 10-14% -AND- you're giving him upside, this is not a fair deal for you. GCs that build get their piece as a fixed fee or a market driven % of cost. If they're inside of the range above, you're overpaying by a lot and the GC, is getting rich off of you. If you haven't signed a contract with them, I would suggest reconsidering this arrangement. 

The GC gets paid plus a big piece of the upside, with less risk. If the GC defaults, the bank will get the funds from you to cover him. Consider if you had a GC build a bunch of houses for you 10 years ago and paid full price (GC Fee) and gave them upside - this would be extremely costly. 

Given your unit count, I would suspect you're not needing him as a guarantor to get the deal done. If you don't need him to sign loan docs with you, you're giving away too much - overpaying for their services by a good margin if he/she is taking a full GC fee too. 

I'm curious to hear how these are set up in newer developments where city water and sewer are too far away. Sewers to me are a foreign concept as I've been fortunate to always be on city water and sewer. 

What would a new, rural setup look like for say, 50 to 100 units. Is there a rough and dirty rule for sharing wells and using a common septic for multiple dwellings to ease up on costs and make things for efficient?

Thanks in advance!

@Logan M.

One of the easiest checks to write is for drain auguring and sewer clearing. I'm fortunate to have a great, skilled outfit that handles those things for me. 

Early on in my career, I remember other investors speaking of the quick breakeven for a sewer snake. 

I asked a plumber at the time that was working for me, why don't you cable lines. He looked at me, stone cold and said, "with the herpes, hiv and god knows what else is in that sewer line, those other guys, for $65, they can have that money." 

I say this as no disrespect to the people in the trades - their jobs can be tough... only as a note to the risks of doing such work. 

I've purchased lots at steep discounts that were purchased by people in your situation. 

Wait until you're certain to build and not more than 18 months out to proceed. Save cash until then for the lot. You could get a heloc on your existing home to use as a tool to potentially use to buy the lot of provide down payment $.

Talk to local and regional banks. They'll offer the best terms and rates. Lock your rate in for all five years when you take out your loan. Not all banks will do this. Typical loans are 5 year balloons with interest only in year 1. Any bank that wants to float your rate until completion is not looking out for you. There's been posts about people on this board building at 3% and the bank floated their rate to 8 or 8.5% over the year it took them to build. 

Don't waste your time or sanity on the larger national banks like B of A, Us Bank, etc. They simply don't understand this segment of the market. The one time I took a flier from a lender at Us Bank, the man lied to me, to make me want to work with him by offering terms he couldn't deliver on. 

You should also talk to banks you're presently working with. Some banks want new build loans and price accordingly. Some don't want them, but will still do them - their terms are usually inferior by quite a bit. 

@Steve K.

Why I think it's a new agent? I know many people that would laugh at such a request. Let's assume that's half of the people in a market. The realtor now can only work with half of their potential customers. Beyond that, who is going to refer someone that operates like that? In our reia, we probably would laugh about this person a few times a year. Just saying. I'm sure if this is a hard and fast rule, demanding an ID in order to work with someone to make a nice commission - they probably have a bunch of other exclusively self serving demands of their customer. To me, it would seem difficult to sustain yourself in a sales position with this approach. I've probably worked with 12-15 realtors over the years. No one has ever asked for ID, and it would be memorable if one did. 

It's not them seeing the ID, it's also them being a responsible custodian of the information. When large companies, like Home Depot get hacked (40,000,000 customers) and they offer 12 months of credit monitoring, as their way of making things "right" - that's not enough to offset a lifetime of a compromised identity and all of the headaches the come with it. Their settlement, from what Google tells me, amounted to less than 50 cents a person. 

Do I think a realtor is going to protect my personal information in the way it should be.... uh... no. Some certainly would, but probably not even the majority of them would. 

As far as a safety issue - pack heat and be trained and proficient in using it. I realize that's not a perfect solution, but certainly a better one. I went into a business a few years ago, and on the outside door, it said "This is NOT a gun free zone." I don't think anyone will try any funny business there. 

I'd laugh at someone making this demand.

It's the title company's job to check Ids for fraud prevention in my opinion. Sounds like amateur hour to me. If someone asked me for that, I would respond by telling them I'd need their Id, a background check on them as well as 10 references to call. While the realtors in the room speak of safety and stats (I understand their concern), a thoughtful perp would use a stolen or fake ID, therefore giving a realtor a very false sense of security. So then what? Should this realtor have you run by the police department for a full background and ID check in order to show you a house? Perhaps they should also run your prints and dna test to make sure the background check didn't miss anything. You can't be too safe. 

I don't think the brand new realtor will be in the business too long, so I wouldn't waste my time working with them now. 

I'm not in your market. 

I do not find that price increase in line with how my costs have changed. It sounds like they're being greedy on you for this change order in my opinion. I'd ask to see a breakout of costs and try and see where the costs have "suddenly" spiked.