All Forum Posts by: Paul Ritkouski

Jon and Scott,

Thanks for the replies! Maybe I can ask a follow up?

Could either of you speculate on the interest rate (a range is fine) that a hard money lender would charge on a loan of this type? I have a 786 credit score and 100% secure job for the next 3 1/2 years.

Sounds like most hard money loans include "points" or similar "kicker" or "fee" of some type at the end of the loan?

To realize the potential of these lots, I would need to do some work with the county, which will take time. Sounds like the longest time horizon I could expect for a hard money loan is 2 years?

Is there a "hard money loan primer" somewhere on the site that I missed? I would be happy to go read it if I am wasting time with questions that are covered elsewhere.

Thanks again!

Hi,

I am just doing some initial work up front here, but I might have a deal for a bundle of 5 to 10 lots in an existing residential subdivision in Colorado near a ski area. Lots are selling for around $30,000.

Does someone know of a hard money lender willing to lend short term (2 or 3 years) on a bundle of residential lots like this? If so, what sort of terms would I be looking at?

Thanks in advance!

Hi Patrick,

Would you be able to help someone trying to purchase a package of 5 to 10 residential lots in an existing subdivision?

Thanks!

Hi,

I am interested in buying a package of residential lots (between 5 and 10 lots) in an existing subdivision near a ski area.

Could someone provide some general guidelines for what I could expect for financing terms? I am guessing it would have to be private investor funding. What terms are possible/reasonable? (interest rate, term, baloon, LTV, lender participation in upside, etc.).

Some details:
- 1 acre lots
- lots selling around $30,000
- lots in neighboring subdivision sell for much more than $30,000
- sales history shows brisk sales over past two years and steady appreciation

Given the current situation with real estate lending, I don't know if securing financing for such a situation is even possible, but if you have done something like this in the past, I would really appreciate your thoughts and wisdom!

craigbow1 said:

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craigbow1, I know you posted this over a year ago, but I wonder if you might discuss the terms required to secure investors in your project? I would guess terms included some sort of interest payment over the short term with equity participation at the end of the 18 months?

It is ok if you don't want to discuss something like that, but I am sure it would be of interest to many novice land developers what sort of terms were required to interest investors in this project.

Thanks!

I have never specifically used options to tie up real estate, but have traded stock options and thought I would throw in my .02 cents on risk.

Any option is simply a contract between two parties where one party pays a monetary amount up front (premium) for the right, but not the obligation, to purchase some asset at a set price over a specified time frame.

I would assume you could hire a lawyer to structure the terms of this option contract to meet your specific needs (the size of premium you would offer, the selling price of the land, the time frame that the option was good for). The longer the time frame, the higher the premium will most likely have to be to entice the seller to enter into the deal.

The big risk with any "derivative" instrument (options, futures, etc.) is that things may not go like you planned over the time frame that the option covers (development goes slower than planned, you can't find a buyer, etc.). If that happens, the other party keeps the option premium you paid them and keeps their land also.

Remember, with any "derivative" instrument, you are using an incredible amount of leverage, but time is your enemy. You have to be "right" twice. The value of the land has to go up AND it has to go up within the time frame your option covers.

Hope that helps a little bit!