Buying 4 Acres Of Land To Develop On - Any Help For A Newbie?
Hey Everyone,
I appreciate all the knowledge on this forum and hope some experienced people can advise.
I have an opportunity to buy 4 acres of land for $1.5m. The seller is not flexible and wants the total amount. We have provided her with $50k as earnest money and will be paying an enginner approx $7k to do feasibility, soil, etc. tests.
Currently it is zoned R1. Ideally, we'd like to build 60 homes on it, get it rezoned as R3. The general contractor quoted that the approximate price would be about $9m to build this out. In addition, we have interviews with architects, attorneys, and loan officers lined up. We plan on selling each unit for 350-420k at minimum. The market is booming.
We found out that an "a&d" loan would require 50% LTV (need 750k to close). How can we make this work and do the numbers make sense?
I found out a construction loan alone could be 90% LTV.. but in our case, that would be 10% DP which would still be 90k. I'd rather go for the A&D loan and put up 750k for the land.
Any help/guidance is very much appreciated.. thank you.
Make sure your purchase contract has contingencies for rezoning and your desired number of lots. Getting a change of zoning is NOT a slam dunk. Do you have reason to believe that the local government will rezone as you want?[ Edited by NancyChadwick on Date 05/10/2004 ]
Quote:
On 2004-05-10 08:50, NancyChadwick wrote:
Make sure your purchase contract has contingencies for rezoning and your desired number of lots. Getting a change of zoning is NOT a slam dunk. Do you have reason to believe that the local government will rezone as you want?
<font size=-1>[ Edited by NancyChadwick on Date 05/10/2004 ]</font>
We spoke to an engineer who has been doing this for 25 years and he says he is familiar w/ the county officials and the board. He says that R2 should be likely, but R3 will be very hard to do. He also said that the neighbors might protest.. so it would be better to have some sort of 'town meeting'.
As for numbers, do they make sense? Are there any books you can recommend? Also, how does financing work? is it better to get an A&D loan or just a separate construction loan after we acquire the land? THank you..
As for the question do the numbers work, I'm still focusing on the underlying deal.
Purchase price is $1.5mil and not per approved lot. New homes on the lots would sell for, say, $400K.
So:
How many R-2 lots has your engineer estimated the site would yield?
What is the estimated costs for horizontal improvements?
Public water and sewer or on-site?
Quote:
On 2004-05-10 16:10, NancyChadwick wrote:
As for the question do the numbers work, I'm still focusing on the underlying deal.
Purchase price is $1.5mil and not per approved lot. New homes on the lots would sell for, say, $400K.
So:
How many R-2 lots has your engineer estimated the site would yield?
What is the estimated costs for horizontal improvements?
Public water and sewer or on-site?
Not sure about the water/sewer on-site. I am assuming not. What would that typically run?
As for the number, there would be as follows:
R1 - 20 homes
R2 - 32 townhomes
R3 - 65 condos
Are those realistic numbers too?
I suggest you ask your engineer about the water and sewer--if public is available and if not, the cost of on-site. If R-2 permits townhouses and your engineer is telling you that you can rezone to R-2, I have to think that public utilities are available at the site. As for the yield, I have no way of knowing if this number is reasonable. Did your engineer give it to you? Also, are you saying that a townhouse on its lot would sell for $400K?
Quote:
On 2004-05-11 12:18, NancyChadwick wrote:
I suggest you ask your engineer about the water and sewer--if public is available and if not, the cost of on-site. If R-2 permits townhouses and your engineer is telling you that you can rezone to R-2, I have to think that public utilities are available at the site. As for the yield, I have no way of knowing if this number is reasonable. Did your engineer give it to you? Also, are you saying that a townhouse on its lot would sell for $400K?
I believe the engineer mentioned that th utilities would be available for this site. There are homes right next to this 4 acre lot. As for the pricing, yes the townhomes would sell for approximately $375-$400k and then move on from there for each release.