UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev | Next
Author: Dwdonhoff Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127222  
Subject: Re: financing to buy, and then subdividing Date: 7/16/2013 6:00 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
Hi 2gifts,

A conventional loan will tie up the entire original property as collateral. If you went that route, you could do this;

- buy new property and move into house
- get engineering done to subdivide, and put current house on the market
- sell first lot

Pay off conventional financing

Get new conventional loan on smaller 3rd lot with your home on it.
Get construction loan on the development lot,
- build new house
- move into new house, and sell remaining lot with house

Pay off conventional loan on sold home.
Get new conventional loan to take out construction financing on new home.

That's a whole lotta turnaround fees... can I be your broker? ;~)
(ACTUALLY KIDDING... the above is likely a nightmare scenario that takes multiples of time over simpler transactions, and I don't get paid by the hour for origination ;~)

Better idea;
Get an acquisition (lot loan) and construction loan combo to acquire the whole thing in the first place. It would be a portfolio loan, so the face rate will be higher, but by eliminating so many transaction turnaround costs the net cost would be much lower. Let's ballpark it at 9% & 3 points (but it may be as low as 7% & 2 pts... I dunno... not quoting anything sharply as I don't know the particulars.)

As you subdivide & sell off partial lots, you'll be able to restructure the collateralization with the lender without a full refinance. When the new place is certified occupiable, you can then do a single new conventional refinance on that at purchase rates & terms, and the sale of the old place will finalize that lien.

Who loves ya baby?
Dave Donhoff
Leverage Planner
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev | Next

Announcements

Useful Resources
Our Home Center has all you need to make buying and owning a home a great experience. Get or refinance a mortgage and much more!
Buying/Selling a Home FAQ

Mortgage Professor
Offsite resource for mortgage questions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement