Re: Financing site purchase and construction
From: Jim Snyder-Grant (jimsghotmail.com)
Date: Wed, 20 May 1998 09:56:55 -0500
Eleanor asked about how groups in development paid interest on early 
internal investments. 

At New View (Acton MA), we agreed to pay interest on loans above the 
agreed-on minimums. If memory serves, we accumulated interest at prime 
+1 during the early stages before we had permits. Then we ramped the 
interest down to near 0 as construction (and risk) prceeded. People were 
given a credit at closing for the amounts they had put in, plus 
interest. I was not on the finance committee, but it seems that the 
rates were determined roughly by canvassing people about what level of 
interest would encourage them to give enough, while still saying below 
bank rates. We had a lot to raise. (almost a million among 24 households 
before the banks coughed up anything). 

Eleanor also asked about how cost over-runs were allocated. We called 
the difference between total constrution costs and total appraisals 
'overage', and after much complex discussion we did agree on an 'overage 
formula'. Essentially, 1/2 of the overage was distributed equally, and 
1/2 of the overage was distributed in proportion to 'house price'. There 
was some trickiness in defining 'house price', to avoid circular 
definitions & double-charging. We also did some other stuff to help 
absorb the 'overage' such as charge extra for some site advantages that 
some house locations had (views, walk-out basement possibilities). 
There's more to our house pricing that I've described in earlier 
postings...

-Jim

Where a new approach to getting the common lawns mowed - rotating teams 
of 4-5 volunteers each to mow over a week or so - seems to be working 
pretty well; where we had a lovely impromptu picnic lat night on one of 
those rare days where weather & bugs conspired to let us hang out and 
eat together outside; where the common house site is staked, and the 
common house committe  is rapidly exchanging emails 
on issues that will let us close on a construction contract; where our 
monthly newsletter looks better every month; where Spring is very strong 
right now, with all the optimism and dreaminess that go along with 
Spring.

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