|RE: **Getting The Construction Loan**||<– Date –> <– Thread –>|
|From: Rob Sandelin (Exchange) (RobsanExchange.MICROSOFT.com)|
|Date: Thu, 11 Jan 1996 14:36:51 -0600|
The number of units you have committed members for is not necessarily the issue. The issue is capital. What you will need to come up with is a percentage of the Acquisition and development loan, typically 40%, although it could be more. Almost all condo projects in my area are built with NO presolds, but the developer puts up to 60% of the A &D loan in those cases. So if your A&D is for a million dollars, you will have to come up $400,000. A single person could contribute that amount. In some cases people have sold their homes and rolled all the captial into the project, and in most cases, people have put in varying amounts of capital. Raising venture capital is the subject of several books, although some sources you might want to try and tap is out side partners with members relatives. Unless the banks in Utah are different, you can co-venture with any number of partners so you can use capital from people parents, uncles, whomever will put money into the pot. Obviously document this well and have an attorney advise you on contracts and such. At this stage, there is a huge pyschological thing going on in your group where people have in some cases their whole lifes earnings on the line. Those same people may suddenly become enormously conservative about EVERYTHING. This can also be a place where you have to make some fast decisions like - do we drop this lender and lose our application fee to go with this other banks deal? You might very well find your group paralyzed at this point by the folks who have the most at risk. Some general advise: Make at least one extra copy of every single form, document etc. that the bank asks you for, including your application form. This way if you want to approach another bank, you have most all the information you need right at hand. Keep your concept simple when you are applying to the banks. Assuming you are using the condo model of ownership, don't get all starry eyed about cohousing to the bank. You are building a condo project (and where you eat dinner is your business, not the banks). Empower somebody to represent you and make some decisions. Its sometimes not a good idea to have to run EVERY detail and negotiation item through a large group consensus. This seems obvious, but watch out how you deal with it. If there are difficult relationships, they will get more difficult under this stress. Pay attention to this, even holding a special meeting to let people blow off steam or whatever. Learn from rejection. If one bank turns you down, politely ask why and then use that information on your next application if you can. Rob Sandelin Sharingwood (Where a single 72 year old woman bought the land and did the rezoning all by herself)
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