With regard to financing a condo project, I would think that there are two ways: 1) Acquire the land typically with the help of a bank loan (90% financing, 1st lien on land). I suppose you could also lease the land, or do a ground lease. Hire contractors and architects to construct a building. Fund some type of construction loan (or take out a construction loan from the bank) with periodic draws as needed to finance the materials used in the building, as well as fees and expenses owed to contractors and architects. Oversee process. Sell condo or rent it out. 2) Acquire already built condo and/or land and rent out to lessees.
One thing to also note is that the periodic draws off of a custom construction loan are only paid AFTER the process in question has been completed and is inspected by the bank. So the an individual must have the liquidity to float each process or draw section before the bank pays out. Another thing to note is the City of Houston Permits Section is quite stringent and there are over 20 inspections needed per house and the plans must be stamped and approved before construction begins. This process can be quite a handful if you don't know your way around.
Actually, this is part of my issue. I did my re-finance completely over the phone/email for this very reason. I actually know people who are musicians with very good credit who get steered away from loans at banks and lenders because they come in with long hair and in jeans. One friend of mine has a half million dollar house in West U and a loan officer actually told him - before even checking his credit - that he might have a tough time qualifying for a home equity loan. He has perfect credit and makes well over 100k per year and just wanted to get a 20k loan to do some home improvements. Like me, he had to go through someone who didn't see him first. He ended up getting a lower rate and taking out more money without seeing a single person until the close. Granted, these ladies seemed pretty out there.
That depends on the bank. Not all are like that. Im building my own home and contracting it. My bank does inspections, but allows me to take draws off my line of credit before the process is started. The only item they won't let me draw on right away is for the slab, and thats only contingent on a form survey being done first.
FD -- Yes, the points you raise are very important. At least in Houston you don't have to worry about rezoning or getting zoning upgrades or anything like that. I've always had a passive interest in real estate investing, but haven't ever done anything with it. A buddy of mine in Austin bought a four-plex of apartments and has absolutely lost his a$$ because of tenants moving out and failing to pay. He's considering suing for fraudulent conveyance, but that's just more money and time to invest in the legal process and he may not even win. It was his first investment and basically he didn't do a proper investigation before buying it. Sourced it out of some magazine, so what do you expect.
Given the line of business, I'd wonder if you got shopped to see if you were complying with fair housing standards.
That's kinda what I was thinking. I've met some dumb dumb dumb people in my day, but no one that had no idea they could not afford a $500k condo.
That is all I was curious about...I didn't mean anything too personal. It just seems like one of those areas that don't have a direct pool because people don't go to school for it, and those I have known have been all over the map. I guess all you need is money to start it up (and the interest, of course).
I would think they'd send people who could afford to do that. I mean whether you're white, black, blue, or green, if you can't afford it, you can't afford it.
Wow, a 4-plex as his first investment property? Sucks for your friend, I hope he learned his lessons. I hope he is working on some new tenants rather trying to recoup what has already been lost.
