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Discussion Starter #1
I just started a new business and am having difficulties. I was hoping for some advice.

I recently aquired my general contracting license and have started an LLC. I had a private investor (or so I was led to beleive) that was going to finance me for 6-8 spec homes. He recently backed out. I would not have done this without having enough financial backing, however I have enough money invested in the company startup I can't simply turn away. I have been tring to find enough financing just to build one spec home.

I still have my job and I have a partner who still has his job.

Banks have told me they would finance projects after my first one, but noone I have found will help on the first one without me owning the lot free and clear.

I know everyone is going to tell me I need lots of money, I thought I had it, but given the circumstances and my perserverence, I beleive I can make this work, at this point I have too. I've even considered putting a portion of a lot on a credit card (not my first choice!!)

So my question is:

Does anyone have any contacts with lenders that may be able to help me out?

Any suggestions at all?

Thanks in advance
 

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Not to be an @ss but this question is asked and answered many time. My first piece of advice is to search this forum and you'll find alot of good information about starting up.

Financing is not my area of specialty however I know a few guys who had such a strong desire to succeed they took a 2nd mortgage on their own home to finance their first spec home. This is risky but if you are confident and compitant it might be something worth considering.

You might want to try Nate's other site www.inctalk.com for advice on financing. I can think of a few other choices though, perhaps build a home for a person who wants a home built and the bank might consider that your first spec home. Next is take an add in the newspaper "Looking for private investors to build spec home." I am sure you will find some reaction to that. You could also try going to accountant who specialize in finance and speak to them they might know investors.
 

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Follow Grumps advice, plus look into that nice sounding phrase "Pre-Construction Pricing" which I can't confirm, but highly suspect means "I don't have the money to build the project so you pay me ahead of time and I'll build it on your financing in your escrow account."

Tim
 

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Discussion Starter #4
I have thought about 2nd mortgage, problem is I currently live in a manufactured home and banks won't touch it for a second. I have thought about running an add for investors and that might be the way to go.

I've talked to banks about presolds as well, they usually like to see a track record. But I still haven't ruled this out either.

I will look into the phrase "pre-construction financing" I have never heard of that.
 

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Run your ads. The only difference between a month ago when you were loving life and today where you are hating it is that a month ago you had an investor. Find another and life will be good again. If you can't it's time to go to plan B. Only problem is you don't have a plan B right now, but it might be to start working as a GC and save your money to buy that first lot.
 

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sammy said:
I have thought about 2nd mortgage, problem is I currently live in a manufactured home and banks won't touch it for a second.
Sammy ,
Is your manufactured home on leased land? If you own or in the process of buying the property, why not update...... build the first house there .
what part of the country are you in?
In the mean time .......... don't quit your day job!
Do the research as suggested and when you jump make sure its with a propper plan (keep your overhead low)
good luck , and stay curious
Dan
 

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Provided you're confident in your ability to succeed, swallow your pride and ask 15 or 20 friends and relatives to each lend you what they can. The more the better.
 

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I would avoid at all costs taking money from friends and family. If things go south, you want to at least have somewhere to go for Christmas.:)

You could try an ad, but I would think you'd have a pretty difficult sale trying to convince a stranger to fork over large amounts of cash for a spec house. Would your former investor provide any introductions to others-- out of guilt if nothing else?

Other than that, talk to everyone who will listen.
 

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Ok first off get a deed of trust on said lot. Get some prints cheap maybe off the net get permits and a there will be a bank that will give you a construction loan. Without the deed of trust and permits your dead in the water.
Alot of raw land owners know a that banks will not touch just land so they will do a deed of trust with a minium down in escrow. Then get submitted and permitted. Then go to a bank.
 

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Discussion Starter #11
Thanks for the input guys. It's a lot of help.

I think what I'm going to half to do is sell the house I'm living in. I'm wanting out of here anyway.

Family and freinds are to broke or to cheap to help...( Isn't that always the way) :)

I don't have enough to purchase the lot out right, but I have a good business plan, a good floor plan that will sell quickly, an appraisal and cost to build.

I got all the numbers, the main problem I'm having is high debt to income ratio and to much revolving debt.

I'm still talking to banks and mortgage companies. I WILL make this work.

I don't feel comfortable trying to convince a stranger to let me build their house, not having built any in a long while. (I've been out of the biz since 92)

Your input is priceless guys.....Thanks
for the help
 

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sammy said:
I just started a new business and am having difficulties. I was hoping for some advice.

I recently aquired my general contracting license and have started an LLC. I had a private investor (or so I was led to beleive) that was going to finance me for 6-8 spec homes. He recently backed out. I would not have done this without having enough financial backing, however I have enough money invested in the company startup I can't simply turn away. I have been tring to find enough financing just to build one spec home.

I still have my job and I have a partner who still has his job.

Banks have told me they would finance projects after my first one, but noone I have found will help on the first one without me owning the lot free and clear.

I know everyone is going to tell me I need lots of money, I thought I had it, but given the circumstances and my perserverence, I beleive I can make this work, at this point I have too. I've even considered putting a portion of a lot on a credit card (not my first choice!!)

So my question is:

Does anyone have any contacts with lenders that may be able to help me out?

Any suggestions at all?

Thanks in advance
Try www.americanhomepartners.net They are a company designed to finance a home that you will build and then live in. The simple view of the plan is they require 5% of the cost of the land as a down payment they will finance construction up to one year when the co is issued you will find traditional financing and repay the construction loan. No payments are due untill completion and the equity you build by generaling the job yourself is used as the down payment for your mortgage. The biggest draw back is you must use one of thier plans. They are involved in overseeing the project to make sure it is getting done on schedule and on budget. Once the loan is paid back there is nothing to prevent you from selling the house instead of moving in.

Jim Bunton
 

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Uh, can I ask why you need to start at the top and work down? Why don't you get a bit more contracting experience first? Pardon me, but if you have to ask what to do on this forum you still have a steep learning curve. Your partner with the cold feet and big pockets might have done you a big favor. Specs are not a guaranteed out of the park home-run. This is where the big dogs play, they have alot of seed money, they know what thier costs are, schedule with expedience and run a tight ship. Do you know if you can compete? There are cash clients out there that need a house, start there and work up. Good Luck! Cheers Met
 

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Discussion Starter #15
Metal roofer.....

To answer your questions.....

I dont feel I'm starting at the top. I'm not building a 1M dollar home. I'm building a 160K home in a subdivision that has sold every spec home built there in a community predicted to grow at 10% per year for the next five years and possibly more if a local company gets a government contract.

I do have a steep learning curve, that's why I perfer to build a spec rather than someones dream home. I'm also keeping my day job. I can do this because I normally only work 3-4 days per week one of those days being a weekend. Forums are created to share ideas and solicit advice are they not?

I realize specs are not a guaranteed thing (again.....day job) But it will sell eventually.

My cost to build came from a contact I have that just built this house and he showed my is receipts. I added to each of these costs to cover market trends, especially the cost of lumber prices. My estimate will be higher than the actual cost. Since I am keeping my day job, the only time crunch I will have is the interest on the loan.

But for the life of me I can't see anyone hiring me to build their house not having built one in ten years, with a company with no track record and no references.

I have the advantage of taking the rest of the year (hopefully not) to build the first house if I need to. This will be the house I get a good portion of my learning curve straightened out on. I will evaluate my subcontractors even though I know the work of most of them. This house will also be a marketing tool, showcasing the work and my abilities.

And I know I can compete, the one major builder in this small community builds homes from 120K and less. There are not many builders with mid to high end homes. This is the market I can exploit. I cannot compete with this particular builder, but the rest is wide open.

All big dogs were a pup sometime......

I appreciate and thank you for your concerns and advice.....
 

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Discussion Starter #16
painter56

That's a good idea and I ahve tried a company similar to that. The problem is the community I intend to build the house in is just far enough away I wont be commuting to and from my work every day. So the underwriters veiw it as a investment property. My partner lives in this town so I have a place to stay when I'm working the house. He will work it when I'm at my day job....He is also my framing contractor...

I would have him put it in his name, but his mortgage company for his home, hasn't reported his payments to the credit bureaus, killing his credit score. from 700 to 580 in 4 months...

I will keep investigating those companies though maybe one will work out.

I would build here where I live, but I know I can't compete here. Too many high volume builders here in all price ranges. They would eat me alive.... I'm better off building 150 miles away with less competition high projected growth and a shortage of builders.
 

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Sammy.
Sounds like you are determined, that's one of the qualities you must have. I'm sure you'll do a fine job, good luck. Met.
 
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