There
are alternatives to conventional
bank financing for land development
& real estate development
deals.
OPM, Others People's
Money
But I know you've heard all that
before, but there are little known
secrets that Major
Land Developers have been
using for years which I want to
share with you.
My clients are absolutely amazed
when I share these secrets with
them, they always respond "so
that's how they do it."
So why would a commercial
financial broker want to share
these secrets with you?
The reason is very simple, at
the opening page of this site
I told you I wanted to educate
you, and so I am.
Also if you're able to implement
some of these strategies, you're
eventually going to need capital
to build out your project.
And we'll be here to help you.
There are three ways in which
you can secure your land development
deal without closing a
conventional loan. The
last way you must seek professional
accounting and legal assistance,
and will not be discussed here.
Work Directly with the Seller
Use Options to Control The Property
Arrange a 1031 Exchange
The above are three methods or
ways to get a commitment to sell
the property with little or no
cash at time of opening an escrow.
Working directly with
the Seller
By working directly with the
seller you can help the seller
solve many of their problems,
and in return he becomes your
partner in the land development
transaction.
Sellers often believe that they
can get a better price for their
real estate if they carry the
paper that evidences the debt
themselves. Here are some of the
reasons
Buyers may have qualification
issues, and if that's the case
you as a buyer may not be as concerned
about the interest rate, price
and terms and therefore the seller
as the one assuming the risk will
get a higher price and you get
the deal that you were not bank
qualified for.
The Seller will get greater after-tax
profits.
By the seller carrying
paper they will not be taxed
on the amount of the sale, but
their tax will be based on the
installments paid over the years.
In other words a large capital
gain may "push" them
into a higher tax bracket, but
if the sale is spread out over
a period of years, the seller
may not be pushed into a higher
tax bracket.
Use Options
to Control the Property
An option is an agreement specifying
some future performance in exchange
for a benefit.
Simply stated, give some money
control the property!
You offer the owner a price for
the option to buy the land. That
price (the option premium) buys
you the right to buy the land
at an agreed upon price at a certain
time in the future.
You can exercise the option by
closing the sale at any time before
the expiration date of the option.
The seller must sell, when you
are ready to buy, no matter how
much the market value may have
escalated during the holding period.
A more sophisticated approach
is to acquire a rolling option
for large
land development transactions.
In a Rolling option the buyer
controls the entire tract but
only puts up the option for the
first portion of the land, after
each execution of the options,
the buyer is able to take down
more land, until the developer
controls all the property of the
original contract.
For a No-Obligation Professional
Loan Analysis of a Land Development
or Real Estate Development Transaction
fill in our form please.
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