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May 19, 2009
Financing a Shell Renovation
Anyone had any experience financing a building shell renovation? I'm looking to purchase a commercial property to do a residential loft conversion (which is legal per the zoning resolution) and am having some difficulty with financing. I figure it's similar to renovating a building shell since it is currently not inhabitable. Anyone done something like this in the past and actually get financing? Or know of a broker or lender who could help?
Thanks.
Comments
As long as it will not be owner occupied, contact Community Preservation Corp.
Posted by: daveinbedstuy at May 19, 2009 2:10 PM
I already contacted CPC. Even if it were not owner-occupied, which I hope it will be, Robert Riggs told me the following:
"Unfortunately, at this time CPC is not committing construction financing of any kind, and I don’t expect to resume construction lending until capital markets ease."
Posted by: wilso26941 at May 19, 2009 2:14 PM
WOW....wilso, they were very aggressive when I was talking to them in early 2008. The are funded by normal banks who, largely out of guilt, decided to funnel money through them to "middle class" or "upcoming" neighborhoods. I guess the banks pulled the plugs. Not surprising.
Posted by: daveinbedstuy at May 19, 2009 2:22 PM
I met a contractor at a recent networking event that specializes in both construction and finance, Bullfrog Builders. Their website is www.blfrg.com. Seemed to know their stuff...
Posted by: Phil at May 19, 2009 3:29 PM
Wilso,
I'd try to find somebody with cash to go in with you as a partner. You'll get terrible terms even if you can find a bank to give you construction financing right now.
Lots of folks are doing deals these days, but most of the deals are all cash -- even ones that don't require substantial renovations.
Posted by: IronBalls at May 19, 2009 3:54 PM
Dave - At least CPC responded to me which I can't say for about 95% of everyone else I tried to contact. It wasn't all bad - he did follow with, "Perhaps you could contact me in the fall to see what we could offer at that time."
Thanks Phil, I'll try them.
Posted by: wilso26941 at May 19, 2009 5:27 PM
I've been "financing" my gut reno by doing it in chunks with saved cash, with a little help from a HELOC. I know this is not what you are asking... just throwing it out there. It is not comfortable, but it is possible.
Posted by: vanburenproud at May 19, 2009 7:07 PM
There is just no financing out there for speculative residential projects. We are living through the dead time.
banks have become allergic to lending and with interests rates at about 1% for depositors, they don't have to work that hard to earn returns. Lending has stopped, maybe you should look into barter.
Posted by: sam at May 19, 2009 7:20 PM
Once again, if it's a good deal that you've spotted, you should have no trouble finding a partner with cash.
Lots of wealthy real estate folks still have lots of cash sitting on the sidelines and are always itching to find good deals . . .
If you don't have any connections, join a wealthy church, temple, or mosque and make the rounds. Folks tend to be pretty trusting who you meet in religious settings.
Posted by: IronBalls at May 19, 2009 8:48 PM
You night try an FHA loan which combines financing for purchase and construction for properties that are not currently habitable. Not sure how it works if the whole thing isn't owner-occupied, but there is a decent amount of information about online. You can try Miriam Ruiz at Wells Fargo who handles them. Good luck.
Posted by: lucybb at May 19, 2009 9:24 PM
starting to see similar on overpriced nonspectacular brownstones as well. Appraisers realizing their job is on the line. Hence bubble over, prices will have to fall or else buyers dry up. If you can buy the property at a rest-of-America price (prob around 100k for a shell) you might get a loan. Here at seller in denial land, not a chance.
Posted by: williamsburgguy at May 19, 2009 9:27 PM
Size, sponsorship and LTV are the main factors driving deals.
- smaller deals by local banks are getting done as they are not all in trouble
- track record, net worth count (a lot)
- 50% Loan to cost better if cash-flowing but you are talking about an "added value" repositioning where you may get 50% at acquisition (empty shell) and 50% of improvements.
That being said, banks do not like development deals now because they have many better options such as low LTV loans on cash-flowing properties.
By the way, development deals may be looking more attractive, but the margins need to be much larger to adjust to the cost of capital.
Posted by: chas at May 19, 2009 9:29 PM
I can assist you with the financing if it's actually a owner occupied home for you.
WWW.FHA203KEXPERTS.COM
Posted by: Rehab Guy at May 22, 2009 2:32 AM
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