Forums: Discussions for entrepreneurs and small business.

Hi Guys, one of my first posts! Woo Hoo!

I have a handyman business and want to farm out my services to a bigger business I run as a supervisor/advisor on a building project (have a builder, build a house sell it, take the profit, do it again and so on...)

But due to a range of things (real estate already and other financial commitments) the bank is saying no to another mortgage or line of credit to fund the project.

Thoughts...
1. The bank does not seem to have a loan for building a house that is a short term loan, they just see the project as a 27+yr mortgage, pay it off early is a bonus...

2. I want to partner with a builder (or two) in a way that gets the place built and they have it to use as a display home for 6 months or so and then sell it.

3. Will a builder want to go halves in the project? Share the profit and only have to put up 1/2 the $$ to build a display home?

Thanks (in advance)


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Steve Gray
Business Zealot!

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Have you tried lending tree yet?  They tend to be able to find a lot of offers on mortgage loans.

Another option might be what is called a "bridge loan"  Though I am not sure it is a better option than a mortgage. 

Of course there are FHA loans, and such that if you were going to live there for a while first, then sell it.  This does not go with your plan, but can be an option to build something, sell or rent your old place, then.. well if your creative it could work..

I really don`t think your going to have much luck finding a builder who would want to do that though.  Not to burst your bubble, I don`t really know your connections or anything. 


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Smart Capitalist | Coffee Shop Funding | Tyler Weaver Personal Blog

I guess you are flipping houses. Are you incorporated? Are you guaranteeing most of the mortgages on your personal credit?

I guess I should have mentioned I am in Australia... There that helps. (don`t you feel much better now...)

I know of a builder that wants to build `spec` homes and this way he would only have to put up 1/2 the cash, to do this, though I want to specify the design of the home to ensure it has `my trademark` and he would have to agree to a range of conditions (I want an enviro friendly home with passive and active solar etc) but the advantage is it will give him a new niche to work into.

Some of the terms  you guys used flipped me out... "Flipping houses" I guess that`s like flipping burgers... "FHA loan" nup don`t figure that one...


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Steve Gray
Business Zealot!

Get more business tips for free! www.freebusinesstips.com.au

Leadership - Innovation - Communication - Personal Development - Marketing - Strategies for Growth

Hi Steve

 

Also being from the only country to loose the Ashes to England let me translate:

Flipping houses: in the states the property laws are a lot different to down here, stateside it is all to easy to get soft financing from non institutional lenders (have they heard of Henry Kay stateside?)  what this allows you to do in a rising market is to buy at a low price usually at a lien (tax default) or foreclosure auction. Then sell privately at market rate before your first loan repayment i.e. the title flips over you as you sell. This can be done in Oz however with our tax and stamp duty structures and lack of a viable soft financing industry the profit margins are rarely viable.

FHA is the stateside equivalent of our state government housing commissions, where we get a free house at a peppercorn rent they get a free loan at a peppercorn interest rate ( go figure?) it operates much the same way as our first home buyers scheme, and was something the US did to pull people out of the great depression. Their loans are usually for existing non premium homes up to a nominated value and you have to do a certain amount of renovations to build equity and increase capital value.

Lending tree is the US equivalent of Rams in more ways than one.

Hope this helps

J

 

Your local bank is still your best bet, if they will cooperate.  The big sub-prime and alt-A lenders tend to shy away from anything that looks like a flip.  The only short term loans I can think of are the 5 year balloons, `hard money` type loans - interest rates are hgih, though - could be 16% a year (interest only payments) until the end of the balloon.  Another alternative might be to form an investment / operating LLC, and invite as many people as you think would participate with funding for a piece of the action.  You might even have to do a new LLC for every project, probably.

Thanks all very helpful, I have found an accountant  who is advertising alternative funding options for real estate, so I will also look into that.

thanks!


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Steve Gray
Business Zealot!

Get more business tips for free! www.freebusinesstips.com.au

Leadership - Innovation - Communication - Personal Development - Marketing - Strategies for Growth

Great job. I wish you the best of luck!

Steve,

Please update us as I for one would like to hear how it works out.

I invest in the US and UK. In both you would be telling the bank you want construction financing. I expect Australia has some sort of equivalent.

Hey jellynet, could you explain a little bit more what a <a href="http://www.apartmentprosoftware.com">bridge loan</a> actually is? I'm still a little confused. Thanks!

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