Of all the subjects discussed in regard to real estate, money is THE subject that appears most often, and is critical to every deal. I do not claim to be an expert on this subject, but will share with you lessons from our experiences. We have been developing real estate projects for 30 years.
Over that time, we have developed projects ranging from single family residential single homes, residential subdivisions, office buildings, small office parks, PUD’s, medical/dental clinics, office/retail condominiums, etc. The bulk of our projects were built as “spec” buildings, meaning we had no buyer/tenant lined up ahead of time, meaning more risk for lenders. Due to that, we often used hard money lenders.
When the market crashed the area where we lived was hard hit. We decided to sell our assets, pay off our lenders, and relocate to southern California, knowing it always rebounds first. We were right. However; because property is valued much higher here, we are again looking for lenders and partners to work with. Though some of our past lenders decided to move their money with us, we have been exploring various options that will allow us to raise the funds needed to develop new projects.
It’s All About Balance
The more money costs, the better the profit margins need to be. Whether you are buying a house to fix and flip, or we are building a project from the ground up, it’s necessary to know exactly what it’s going to cost. Those costs include the cost of financing, as it can make or break a deal. The more risk a deal has, the more you pay for money. However; there is a huge variation on what is charged in points, fees, interest, etc. Just because someone will loan you the money, doesn’t mean that the …read more