|Re: Money again||<– Date –> <– Thread –>|
|From: Nancy Wight (wighthpwarr.wal.hp.com)|
|Date: Mon, 2 Aug 93 14:52 CDT|
> > While we may lose this site :-<, one lesson learned is we need to get > some type of bridge loan/letter of credit arranged before we go after > our next site. Another idea is to get an "option" on the site, which is what developers do all the time. You pay a certain amount of a downpayment, plus a monthly fee to keep the land tied up until you know for sure that you can get permits, have all the financing to buy it, etc. (more on what we did later) > I don't think most commerical banks would touch us. So I'm thinking of > some type of foundation that might support a CoHousing venture. I'm > also thinking of trying the National Coop bank. > > Does anyone have any experience with these groups? Anyone know of a > foundation I might approach? We have some experience with the National Coop bank. We talked to them a couple of years ago, before they had really heard much about cohousing, and they weren't that interested in us. They said they might consider financing 70% of our project, but that wasn't good enough for us. Recently though, they have been expressing interest in us (after we already found another bank willing to give us a construction loan), and I think this has to do with the other cohousing developments already being built in the U.S. They are not as queasy about it as they were a couple of years ago - this is a good sign! You should definitely give them a call. > How did you other CoHousing groups bridge the gap between finding a site > and then getting the groups financial ducks all in a row? Did you get > a stright construction loan then a mortgage? Did you have strong > finanical backing from a group member/foundation/developer? > Robert What we here at New View in Mass. did was to "purchase" the land as far as a purchase and sale agreement. We had to pay about 50% of the cost of the land over the course of 6-9 months, and then $3,000/month (which does not get put towards the purchase price) until we close on the land. For various reasons, we have decided not to close on the land until we get our permits, which will be at least another 3-4 months. The whole deal is contingent upon many things (septic tests, getting permits from the town, getting financing, etc.), so if any of the contingencies don't pan out, we get our money back. We financed the purchase of the land entirely with our own money. We did this by creating a land fund, into which every household had to contribute a minimum of $5,000. People who put in more than that amount would be paid interest on the amount above $5,000 by the whole group. We made the interest rate attractive (I don't remember exactly, but something like 1-2% over prime) so people would invest. The land is the collateral for the land fund, so people aren't taking that big of a risk with their money. The rest of the money needed to pay the architects, engineers, lawyers, and project manager to get us to the point where we have enough info for the banks to give us a construction loan comes equally from the member households (for us this has been between $500-$1,500/month per household). This money will be taken into account by the bank as part of the cost of the house, so essentially, we are paying our 20% "downpayment" over the course of a year, instead of paying it all at once. Once we get a construction loan, we will be home-free. Then we will get possibly another bank to give us the end mortgages. You have hit upon what I consider to be one of the major dilemmas in building a cohousing project: We need to get financing, but before any bank will even talk to us, we have to have site/house plans, etc., and before we get site/house plans, we need to have a site, and before we have a site, we need to have financing. Other cohousing groups I know of have also used this method of putting an option on the land to tie it up for 9-12 months while they do feasilibity studies. In your case, it sounds like you had a developer with cash competing with you, who was willing to take the risk of not getting permits, etc. and having to possibly resell the land later, after putting a significant amount of money into it. Good Luck, and I hope you get your site!! - Nancy Wight New View Neighborhood Development Acton, MA
- Money again Robert Cooper, August 1 1993
- Re: Money again Fred H Olson -- WB0YQM, August 3 1993
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