Re: Your bank loan
From: Tom Lent (tlentigc.apc.org)
Date: Thu, 29 Aug 1996 17:13:24 -0500
> Congratulations, first, on getting the bank loan! It's neat to see all these
> groups hitting major points along the way this summer - the construction
> loan will be *our* next MegaMilestone. Talk about empowering people -
> here you have one group of amateurs after another wading through the
> development maze and building mulit-million dollar projects, just so they
> can live well with one another. It'll make an incredible story to tell some
> day... 
> 
> If I may ask, how much of the final cost of the project will your group be
> putting up? You must need about $2 million to build all the units - are you
> raising the "shortfall" of $600K from amongst yourselves, or from some
> other source? We at WaCoHo are building 25 units, which makes about a
> $3 million project - we have been told that we may have to come up with
> up to 25% of that, which is a huge sum for us to put at risk. On the other
> hand, our consultant says that if we can get the level of risk down, and
> get the bank to assess the project based on the final *value* of the
> houses (as opposed to the cost of building them), we may be able to get
> by on a much smaller number. So that is why I'm curious about what you
> have had to do.
> 
> Thanks and good luck -
> 
> John Major
> jmajor [at] mhz.com
> Wasatch CoHousing

Yes, our  bank did want us to be invested to 25% or more of the $2.2M
total cost of our project before they kicked in. As you can tell if
you do the numbers ($1.4M from the bank) we actually got over to 35%
of our "own" money in. 

We did that by: 

1) setting a basic investment level equal getting to 20% of the
cheapest house ($25,000) and getting everyone to invest up to that
point soon after they became members (once we were in the depths of
development)

2) Charging ourselves a monthly development fee (currently 
$110/month) that is credited towards members down payment

2) Getting almost all of the members to invest their full 20% down
payment (including the monehtly development fees) before we closed
the construction loan (a few have their down payment money tied up in
a house that they have to sell and so could not do it now) 

3) Getting a few more members to invest beyond the 20% minimum 

4) Obtaining miscellaneous loans ($5,000 to $50,000) from family and
friends and the local war tax resistors fund.

We pay a straight 9% annual interest on all loans every quarter.
This applies to member as well as non member loans - any member
investment beyond the basic $25,000 investment and development fees
is considered a loan until permanent loan closing time. 

As long as these loans were behind the bank in order they seemed 
content with crediting them toward our total amount.

Tom Lent 
Berkeley Cohousing
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Tom Lent * 2220-A Sacramento St * Berkeley, CA 94702-1907
           email: tlent [at] igc.apc.org * phone: 510/845-5243
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