Personal Cash Flow While Developing/building
When you develop land and build on those lots. Is the payoff only at the end o the project or are there any mechanisms for accessing cash in small amounts for modest living expenses during the project. (ie. developers monthly fees or salary). I'm torn between using my savings to make the deal bigger or using the savings for living expenses during the project. This will be my full time job.
Managing cash flow is always a challenge. In my business it is always one extreme or the other. I am constantly trying to predict my cash needs as far into the future as possible. Looking forward I make sure that I have enough cash coming in or reserves to meet those needs.
A few of things that I do to help even out my cash flow:
1. Live way below my means. I do not buy toys unless I can more then afford them.
2. No consumer debt. If I can't pay cash for toys I do with out.
3. Structure my deals to fit cash needs. If you have a solid relationship with a lender then you can borrow where you control how you spend the money. I try to structure my financing where I have excess funds availble for a project. If I need cash then I can pull it out of a project. Yes, you can budget management fees, salary into your projests.
4. HELOC is my safety net. As a last resort, I use my HELOC to help cover living expenses.
No matter how strong you are cash flow has to be carefully managed.
Thank you. Excellent advice.
You can get a development fee, or I should say, you should Try to get a development fee added to your budget. This will give you money to live on.
Gregg
To expand a little on one of woodsong's points...
How do you want to use the property? If it's for residential development, the number of lots is a critical piece of the puzzle, not necessarily the number of acres. As woodsong said, make sure you have contingencies in the contract to kick out at the end of due diligence if development isn't economically feasible based on what you and your consultants find out during due diligence.
Nancy
Woodsong--Nancy, thanks for the response. The property is going to be surveyed at the end of this week then we'll know the exact size of the parcel.
Thank you both again for input. This site is truly a great place for ideas.
Tom.