[Fredslist] Residential Real Estate Development Question

[Alan Siege]

Fellow Gothamites,

 

I would appreciate a little feedback on a plan to grow a company.

 

I recently met with the principals of a medium-sized NYC-based architectural
firm that is considering expanding its range by purchasing either a building
or a vacant property and using it to create a residential structure that
they would build.  They have extensive experience doing residential
renovations for people who own the building.  They now want to purchase one,
do all the work and then sell it.   They want to purchase the property in
either Sunset Park, Lefferts Gardens or the Gowanus section of Brooklyn.
They are planning this with the following parameters:  The completed
building will have 4-5 units; the purchase, renovation and financing will
cost no more than $5 million and the entire process will be completed within
18 months of the initial purchase.    

 

Here's the issue.  They are looking for a private lender who will finance
the entire project to be paid back with interest once the property is sold.
They cannot put any money toward the project; their contribution is the
design and build out, so that the lender will participate based on their
track record to produce a beautiful building on time and on budget.  

 

I am considering preparing a feasibility study for them, and my core
question is whether there is precedent to proceed in this manner, i.e. where
the "designers" are not putting up any money, and yet will retain complete
ownership.  And the lender will be paid once the building is finished and
sold. 

 

Of course, there are other issues to be addressed, but my concern is that
their absolute inability to make any financial contribution to the purchase
and construction strikes me as a deal breaker for any lender from the get
go.  True?  Or, is the simple answer, it all depends on finding a lender who
will work under these terms.

 

Thank you in advance for your thoughts.

 

Best,

 

Alan Siege, Principal

 

Small Business Management Consulting

Phone/Fax - 718-768-1672 - www.sbmc.biz <http://www.sbmc.biz/> 

----------------------------------------------------------------

Building Your Business Through Story

 

-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://www.gothamnetworking.com/pipermail/fredslist/attachments/20160601/b4c4d83d/attachment.html>