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All Forum Posts by: Mario P.

Mario P. has started 2 posts and replied 19 times.

Marco Giovannoli If you want to do this on your own, I suggest you: - speak with a planning consultant to get a good idea of the approvals process and timeline; - speak with an engineering consultant will give you an idea of the costs involved with servicing a site that size and a reasonable timeframe to complete the work; - speak with the town planning department to get a sense of the town's view regarding the development and determine the paperwork/studies that will have to be submitted; - ask the vendor/broker if there is an environmental report done for the site to determine the extent to which soil remediation will need to be undertaken; If this is your first project, I highly suggest you find a developer to partner with in order to learn the process first.
Developers typically structure a fee usually equal to ~3% of the guaranteed construction loan amount, payable upon the initial construction advance. You can structure something similar in your situation
The Toronto and Vancouver markets are very different, although the media would have you believe they aren't. In terms of the foreign buyers tax, the main difference is that Ontario's version is not retroactive. Also, foreign buyers are eligible to receive a rebate for the tax upon becoming a Canadian citizen - which is the goal for many of them to begin with. The Ontario foreign buyer tax will have a minimal impact, if any at all.

Post: Does Detroit deserve a second look

Mario P.Posted
  • Ontario
  • Posts 19
  • Votes 15
Interesting article recently published by city observatory (cityobservatory.org, "getting to critical mass in Detroit") suggesting that successful development in Detroit needs to achieve critical mass in a few locations because there are positive spillover effects for surrounding neighbourhoods. The article presents a map indicating several neighbourhoods that would benefit from new housing developments. The main issue seems to be that developers are hesitant to be the first ones to enter a neighbourhood. If there is some coordinated effort among developers or incentives from the City for increased development in the key areas, the surrounding neighbourhoods will benefit from the spillover once the key areas reach critical mass.

Post: Rebuilding a house and renting it out

Mario P.Posted
  • Ontario
  • Posts 19
  • Votes 15
First, find out what the market value and market rents for a new build are. Then, contact an architect/GC to estimate construction costs; contact a lender to estimate finance costs; and, contact your local planning and building department to determine the process involved in obtaining approvals for your project, an opinion as to the likelihood of your project being approved, as well as the costs involved (fees). After gathering this information, you determine your max land cost as follows: Completed market value Less: construction costs Less: soft costs Less: desired profit = Max Land Value As a note, construction lenders will usually lend up to 65-75% of completed market value. Since your plan is to rent out the units after completion, you will need a permanent/take out mortgage to repay the construction loan.

Post: Funding for Raw Land

Mario P.Posted
  • Ontario
  • Posts 19
  • Votes 15
I agree with Jay. Conventional lenders will consider a number of things before deciding to lend you the funds to acquire raw land, such as your experience, your net worth/covenant strength, property details (does the property generate income, extent of entitlement risk, environmental concerns, servicing capacity, time to development, etc), market conditions, and your plan for developing the land. Based on my experience here in Toronto, Ontario, assuming this will be your first development project, conventional lenders are likely to only lend up to 50% of land acquisition price at anywhere from P+1.0% to P+3.0% for a max term of 24 months. Any funds above 50% will be priced anywhere from 7-15%.

Post: How many homes can i build?

Mario P.Posted
  • Ontario
  • Posts 19
  • Votes 15
Assuming you can rezone the land to residential, you can take a look at the surrounding residential developments to get a sense of the density you can achieve on your site (while taking into consideration the potentially undevelopable areas of your site). Speaking with the town planning department will help. Once you get a good idea of the number of units you can develop, you can estimate their potential sales revenue, back out hard and soft construction costs, back out an acceptable profit, and that will give you and estimate of the site's max value.

Post: New Townhouse Development

Mario P.Posted
  • Ontario
  • Posts 19
  • Votes 15
It's important to know what the typical lot purchase structures are in your area. Since you've probably figured out the max leverage your lender will get you, you can figure out how you can give the vendor favourable terms in return for your requests. For example, if the lots cost $132k, you can get $100k from your lender, and it's typical for lot vendors to take back a 10% mortgage, you can offer to provide the $32k in cash so no VTB is required. If you cannot provide the $32k (and a VTB is required), you can offer to provide a lot discharges at greater than 100% per unit closing until the VTB is repaid (ie. repayment is accelerated). Alternatively, you can offer to provide the vendor with a portion of the construction profits. So, if you can sell completed units at $100k each, and let's say you profit $10k each unit, you can offer to provide, say 1% of profits to the vendor on unit closings (the vendor would get an additional $12k above and beyond the $132k for the land). Hope that helps you.

Post: New Townhouse Development

Mario P.Posted
  • Ontario
  • Posts 19
  • Votes 15
In terms of questions 1&2, they are both things that are negotiable with the vendor (also, it will be easier to obtain constriction financing with building permits already in place). Typically (here in Ontario), builders purchase serviced lots by providing a cash deposit for a portion of the price, the vendor takes back a mortgage for a portion of the price, and the construction loan covers the remainder. So, you can negotiate by offering the vendor a larger cash deposit on closing (smaller vtb), vtb discharge acceleration, or a % of construction profit - be creative.
Jamie Parker the residual analysis process is the same, yes. Although, there are of course some important differences to consider when valuing raw land vs. a redevelopment property. When redeveloping a property, there is often less risk involved in the pre-construction phase than the risks involved in a typical raw land development (ie. entitlement risk and timeline, servicing costs and timeline, water/sewer allocation availability, geotechnical aspects of the land, uncertainty as to the number of professional reports required, etc). Since a building (same land use) has been built on the parcel previously, many of the reports/issues have been done/addressed. If we perform the same residual analysis as we would for raw land, we would find that there would be less preconstruction costs involved, and a lower builder/developer profit would be required due to the lower level of risk. All else being equal, the land cost/value would be higher than it would be if the same land parcel was raw, unapproved land.