Residential Land Development - Posted by Patrick

Posted by Patrick on November 07, 2010 at 13:50:44:

Thanks Ray for input. I’m a general contractor here in Baton Rouge, La. For as finding private money for residential projects where would you recommend me look?

Residential Land Development - Posted by Patrick

Posted by Patrick on October 26, 2010 at 10:47:17:


For as financing on real estate land development. What kind of terms you are seeing.

Re: Residential Land Development - Posted by ray@lcorn

Posted by ray@lcorn on October 26, 2010 at 17:31:25:


Short answer: None.

Qualified answer: Most banks have blackballed C & D (Construction and Development) loans entirely. Won’t even look at a deal because the regulators are requiring immediate 50% reserves for C&D loans. That translates to 50% hard equity requirements and verified borrower liquidity for 100% of the loan amount.

As always, there are a few markets that are exceptions to the rule. But the majority have significant over-supply of developed lots with equally tight lending requirements for residential construction.

There is one bank in my market area doing spec financing for builders, but only if the lot is free and clear, with minimum 50% borrower liquidity. However most builders I’ve talked to are already sitting on unsold inventory and not about to spec anything. Many have become remodelers just to keep their crews going.

There is also very little activity in pre-sold new construction because market comps are below construction cost due to a huge over-supply of existing homes. It takes 30%-40% hard equity for the buyer to get a construction loan as well, which they typically need to sell their existing home to get, but are caught in the same over-supply and under-valued comp trap as the rest of the market.

The only real activity is in raw land. Cash buyers with staying power are starting to land-bank raw land if entitlements are in place. In my market land is selling for 40%-60% of AS-IS value, not developed value. Wish I owned an auction company… those guys are on a roll.

And I truly wish my 2010 forecast had been proven wrong. My prediction last year was there would be no bottom for housing until 2012. I’m updating the data now for the 2011 forecast and it appears that may have been too optimistic.


Buying Residential Land Development - Posted by Sara_CA

Posted by Sara_CA on December 18, 2010 at 23:57:51:

I am interested in a piece of development land in
Central Calif. Raw acreage in the city’s sphere of
influence area. It sold for $995K in 2006. The asking
price is $400K. I will offer $200K cash. Is this too
much in this market? I intend to flip to another land
banker, or keep for my own.

Stayed developments - Posted by John Merchant

Posted by John Merchant on November 08, 2010 at 14:35:07:

I’ve been approached by at least a dozen such stalled, stayed developments in the last 5 years, all stopped mid-stream because of “lackaluker”.

And not one of them to my knowledge has resumed or been completed.

What happened?

I’d guess that the costs of completion (and slow pre-sales) rose faster than the devel’r anticipated and caused him/her/them to run out of $$$, then they got caught by the big recession and couldn’t come up with the $$$ to finish.