All Forum Posts by: Lynn Currie

I'm excited to be heading back, @J. Martin

I'm looking forward to sharing with others my model for raising money to do deals. When I first got started, other than the "buy real estate with no money down" hype, the raising capital and structuring deals that worked for both the sponsor and investor was a little bit of a mystery. 

Hopefully sharing my experience (and some of the nuts and bolts of how I structure things) will help others to grow their businesses and excel!

@Manolo D. The contingency makes sense. Thank you for sharing. 

We tend to end up with home owners that only partially fund through financing and are paying overages with cash. There are various reasons, but I see it fairly regularly. In theory the houses can be built on their budgets, they just want extras that aren't included in the bank loan so they pay for it out of pocket.

@Karen Margrave The house I'm talking about is different because it's a custom, but I do have changes to specs. I do require payment up front for those changes and still pick out, or at least have to approve, the selections.

Either way though, I like your requirement of payment before changes are made (that can't be drawn on the bank) upfront. That also eliminates potential problems and *might* fend off crazy changes. Oh, who am I kidding?? We will still see them. Your orange wall one is fantastic, btw!

To give everyone an update, my attorney is working with the compliance department to get the clauses struck. I'll have to update everyone early next week with how it shakes out.

The kicker is that this contract puts the responsibility on my company specifically to build the house for $X by X date or I get a $300+ a day penalty until the house reaches "substantial completion." My experience with customs is that the delays are usually on the client side, there is no way I'm signing the agreement, as is.

I spoke to another buddy that is a custom builder and he said the way he handles it is that he gets his client to run his contract requirements through their lender. If the lender won't work with his terms, he tells the client to use another lender. In the future this is what we will do. We will not wait until the lender puts docs in front of us (less than 24 hours before closing and only because I requested them).

@Karen Margrave funny you mentioned the amendment, we have one ready to go with my client in case their bank won't change the clauses. We don't like that solution very much, but it is an option.

It's interesting that you require payment up front for changes. I haven't been doing that but really need to consider it.

@Manolo D. yes, that is how the bank's contract is, but my contract is clearly NOT cost plus with maximum price guarantee. I do build small contingencies in, but it's really meant to cover the always rising labor and construction costs.

Good idea, @Karen Margrave. I'll give Bryan a buzz.

Oh, it's very contradictory. Their contract essentially reads that if there are overages, the builder is financially on the hook. Their response to my concerns were that "this is how we do it and every builder signs it."

I've been through something similar with a business partner and it was really, really awful. I'm sorry you're having to go through this. 

Get out of this deal by any means necessary (meaning you might technically not get what you think you're entitled to), and then hire a good lawyer for formation docs from here on out. @Chris K.is absolutely, 100% correct. 

Do not skimp on attorneys. Find someone really good, and let them take care of you.

In my case, my ex-business partner and I used a real estate attorney that we both liked (and I still use for RE transactions), but she wasn't really representing either one of us on the business side. We had a complicated parting of ways and the contracts weren't written to handle that.

One of the attorneys I used to get out of my pickle was a corporate attorney who's specialty is the formation and dissolution of businesses. She now reviews and/or creates anything I sign. Does it cost me? Yes. But the cost of getting out of a bad deal is so much worse - financially and emotionally.

I hope you find your way out of this without too much stress. Keep us updated if you're comfortable doing so.

Shoot, I was just in Denver last weekend. I would have been happy to meet with you two. I'm not local, but I am a REI nerd and like Denver.

I never seem to be there when the Meetups are happening, but like @Joshua Fulenwider mentioned, I'd start with networking gigs. If you stick with it, you'll meet people there that will become great allies and peers.

Let me know if you're still looking. I met with a guy a couple of months ago that comes recommended from another builder as a PM. 

Hello BP,

Do any of you work with lenders on a cost + basis?  If so, when the bank puts their version of the buyer/GC agreement in front of you, do they make it a fixed-price contact? If so, how do you handle?

I'm finding that the banks ask for a copy of our signed contract before the client's loan goes through underwriting, but then they present me docs to sign as closing that do not align with the contract. 

@Karen Margrave have you seen this?

Sure. I know several that are very successful, but that started in the trades. The developers aren't likely going to JV with you, they don't need a GC that eats up their equity.

You do it from the other angle, you as the GC become a developer and then you bring in equity investors for the projects. To do this successfully though, you need to understand the financial side. That's what investors care about - your ability deliver on the returns that are in the prospectus.