How Does Your Company Structure Your Construction Loans?

First step:

1. Put the right house on the right lot

2. Have a good plan

3. Have a good budget

4. Know your soft costs

Give a detailed, line item budget showing your costs for the construction and soft costs.

Executive Summary

We like to get involved with the property when you’re getting pretty close to getting your permits

First step:

Example:

So initially I usually get a phone call and an email from a potential borrower, we’ll have a five minute, ten minute call about the project.

If it sounds good, I’ll come to the property, I’ll walk it with you.

Usually you’ll bring some plans, an executive summary.

We’ll meet there, we’ll talk further.

From there I’ll put together a full package and give you a letter of intent usually within a day or two.

And some of the other key factors on getting a construction loan, you’ve got to have your soft costs ironed out.

Important:

Let us know what you’ve paid for already and what needs to be paid for.

We have to make sure we finish the project on what your budget entail.

That really helps us because then we can determine is your construction budget reasonable?

Second step:

That’s all we need to actually make a determination pretty quick to give you what we call an LOI—a letter of intent— that we’re going to make a loan based upon you providing the rest of the information

Once we issue an LOI, we’ll also have an independent meeting where you will meet with a third party construction manager and he’ll actually do a budget review for us.

He’s going to go over your numbers and make sure that it’s feasible that the project can get done for those costs

The other gauntlet would be to get a future value appraisal done

Once we get the appraisal back and we see that the value is there, we come up with our loan amount based on all those numbers and factors and then we issue a loan commitment.

Essentially, a HARD MONEY CONSTRUCTION LOAN, we’ll lend up to 65% of the value when it’s built, the future value

Third step:

Fourth step:

Draw Loan Docs - You sign loan docs, and we’re ready to start funding your loan.

Construction loan - we’ll meet with your contractor and we’ll basically come up with a pay app and that’s your draw schedule broken out.

You need your mobilization, then we go to your foundation and your grading and then your foundation

Then we fund out by percentages, based upon an agreed upon pay app

It’s a pretty streamlined process, a lot easier than dealing with banks.

That’s why hard money is great for spec home builders along with renovation and real estate flippers.