Development Opportunity
I am looking to build on an empty lot in a very nice neighborhood. Typical lot dimension of 25x100. Land is going for 175k, and it would cost another 200k or so to build. Comps in the area are selling for 500-600k. My credit score is 690, however I am young and am still renting so I have no equity and limited credit history (essentially less than 2 years). What are the chances of me getting this thing financed, and would it be possible to use less than 10k out of my pocket? If there are any investors out there interested, please shoot me an email.
Welcome aboard.....click on the Lenders tab for programs that may help.
Good luck
What kind of property?
There are two possibilities. First: lot size - 25'x90. Would build 1800-2000 sq ft. townhouse. This is the typical building type in this area. Second option: lot size - 95'x83'. Would either try to split up the land and build 3 town homes, or build multi-family rental units to take up most of the site. I'm still entertaining various ideas and possibilities.
That's amazing, you can build on 25 foot wide lot? wow
MT
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Lenders are going to consider more than your credit score. They will want to know your income and experience as well. Are you going to be able to make the payments? For how long? Do you intend to live in the property? How quickly do properties of this type sell in your area? Are you asking for enough money? Are you capable of finishing the house?
They will want to know the answers to all of those questions, even though you will only hear them ask a few of them. You see, lenders want to make sure they do not lose their investment, so you need to minimize the chance of them having to foreclose on the property. And if they have to foreclose, they want to make sure it is finished, so they can sell it for a reasonable price.
If this is your first time building a house, I would make sure that you are very, very prepared before asking for a loan. Have an experienced team behind you, ready to go, such as an architect and contractor, and make sure that you can afford to carry the property for at least 24 months.
Also, go to a mortgage broker and ask them how they would look at the loan process in your particular situation. Don't be afraid of looking ignorant. In most cases, the mortgage broker isn't the one that makes the decision anyway. They just want to give you a loan so they can collect commissions. Use them to your advantage.
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Stay with what is normal for the area. It is easier to find comps.
Thanx for the responses, they're really helpful. Having an architect and a contractor lined up is not a problem as I work in an architectural firm and would be designing the properties myself. By the way, I'm desing 3 townhouses right now on 25' wide lots, and they're working out just fine. A 20' wide townhouse is actually pretty comfortable if done right. I'm sure that I can put together a nice proposal with a solid team behind me. I would be going into this with another guy who is a mortgage consultant. Our only concern is being taken seriously and given a loan since this would be our first project and we're young. I guess the only option is to put together a solid proposal and go for it.
Jeff-
If you don't own the land outright, I doubt you'll find a bank to finance the construction, regardless of your past experience, etc.- you've got no equity in the deal. If you own the land free and clear, you may find a bank to give you 80-90% of the construction costs. You're other option is a hard money lender, who also won't be willing to finance 100% of the deal- unless he's a partner, and has a heck of a lot of faith in you, given your limited experience. I doubt you'll be able to do this all with 10k or less, though- the points on the loan could cost you that much, not to mention permits, approvals, etc.
Also, if the land is worth 175k for a 25x100 lot, it sounds to me like you're in a rather high-end or desireable neighborhood. Therefore, the house itself will probably need to be upscale. I don't know what hard costs are in Cinncinati, but your $200k works out to about $100/SF- sounds kinda light for high-end townhouses. You'll end up paying a premium on that narrow low as well, since any wall within 3' of the property line will need to be fire-rated (I'm assuming you're not building a 12' wide house...lol).
Bob
Jeff-
I'm anxious to see what can happen with this deal for you. You sound like the mirror image of me. I'm also a young intern architect looking for ways to get more in on the action. I have a small lot in free in clear in Louisiana that I want to build on. Hopefully the information I find in here about financing will be beneficial.
the post earlier was right, if your talking about buying 2500 sf of land @ $70 sf that's some pretty expensive dirt. You'll have to build something upscale on it to fit in the context of the neighborhood
Call me at 800 876 6784. I may be able to help you recieve the cash you desire.
-Gabe
Jeff, I am looking at a similar situation in Houston building spec homes. I would be intersted in seeing some of the home plans you are developing. If you are willing to share that is.
Good luck with your venture. I know for a fact it can be done. The banks are running over each other to loan money, and there are plenty of mortgage brokers that carry enough wieght to get the right deal done.
Like you I am a young investor with good credit and big dreams. Talk to people and your dream can come true.
Jeff any updates? For I have a similar situation [ Edited by fmmp on Date 09/16/2003 ]
Well, I called the realtor who represents the lot, and some guy beat me to it a couple weeks ago. According to the Realtor the guy is going to split up the lot and build high end homes just like I wanted to do. *sigh* That's life though, and there are plenty more opportunities out there. In the mean time I bought a house, 2 story stucco, 1 acre yard, needs some cosmetic work, but it has new roof, furnace, central air, and windows within the last 5 years. Got it for 105,000 from a motivated seller, and am looking to sell it eventually for 150k ish. We'll live in it for the time being. In any event, I didn't get the lot, but I bought a house instead. Its all good.
Jeff start to line up lenders for the same deal just in another area. I am researching lenders so that I won't waste time when I do come across something. If you can't locate one I have a couple of HML & others that I have ran across and would be happy to give you the info. PM me if you like.