City Capital Realty

Shawn Rabban


2355 Westwood Blvd Suite 258 Los Angeles
California 90064 USA

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New Commercial Construction Loans

New Commercial Construction Loan

You Can Borrow Up to 100% Of The Total Project Cost

Southern California and Nationwide Funding

red_checkmarkLoan Amount: $1,000,000 min
red_checkmarkLoan amount: 60% Loan to cost
red_checkmarkTerm: 18 months
red_checkmarkRate: Prime rate plus margin
red_checkmarkDCR: 1.25
red_checkmarkPermit fee must be paid in advance
red_checkmarkLand must be free and clear

green_checkmark Condominium Project
green_checkmark New Commercial property
green_checkmark Apartment project
green_checkmark Industrial Building
green_checkmark Office
green_checkmark Medical

Underwriting Guidelines

Max Loan to future value of 60%.
Loan Term: 18 months
Land must be free and clear and paid for permit fees

Borrower’s financial resources and experience play important role.

1. Does the borrower shows enough income on his personal tax return to continue to support his existing obligation in addition to new commitment during short-term process of this transaction?
2. Does the borrower have an adequate cash reserves for paying the initial cost of obtaining plan and permits and also pay the monthly mortgage payment along with property tax and other expense associated?
3. Borrower is familiar with process of obtaining plan and permits and plan check.
4. Does the borrower have a track record of land acquisition and development in the past?

Banks needs to know more information about land acquisition and future development projects.

1. Where is the property located?
2. How much was the purchase price?
3. When was the property acquired?
4. Copy of closing statement and HUD-1 is required.
5. What type of project will be built on this location?
6. What is the size of land?
7. How much of land is flat, slope or hilly?
8. What is the result of geological test report?
9. Is the land project next to commercial building, gas station, body shop, mechanic shop, or possibly close to a contamination site?
10. Phase I or II report is done on the subject land.
11. Who is going to built the project?
12. Contractor resume, license, and property insurance is required.
13. How much will it cost to build this project?
14. Borrower will have enough equity in the project to satisfy the needed requirement.
15. Appraisal report will be ordered by the lender to find out the profitability and feasibility of the project.

Bank’s underwriter will do quick analysis of borrower’s financial and ability to perform.

constuctionAt present financial market lenders have a formula that they apply for construction loan. Usually 40% equity is required in order to be qualified for a loan request for construction project.

How do I get a construction loan?

Your first step in securing a construction loan should be to talk to City Capital Realty loan advisor. The amount you may borrow will be an important part of your discussions with your builder in deciding what to include in your new home. An advisor can also answer your questions about how construction loans are structured.

  1. To get qualified, you will need to provide your basic debt, income and asset information
  2. To apply for a construction loan, you will need to have a signed construction or purchase contract with your builder or developer.The contract will detail certain aspects that will impact your loan, such as:
  3. Contract amount, which includes construction and cost of land, if applicable
  4. Construction start and completion dates

Land Cost: $1,000,000
Building Cost: $3,000,000
Total Project Cost: $4,000,000
Borrower’s Equity will be $4,000,000 x 40% = $1,600,000

How lenders and Financial Institutions calculate equity in the Construction Project?

Example: 1

If you purchased a land for $2,000,000 and construction cost will cost another $2,000,000 so the total construction project cost would be $4,000,000 you need to put 50% of your money as down payment that will be $2,000,000 and you can borrow the balance of $2,000,000 in order to finish the project. In today’s financial market this is the rule of thumb which most of the lenders are requesting.

Example: 2

If you intend to purchase a land that doesn’t have plan and permit, basically you temporary want to apply for land loan only. Some lenders are willing to extend a loan up to 50% of total price for a short-term period. So on this case you need to come up with $2,000,000 of your money as a down payment.
If you are planning to build a construction project but you don’t have plan and permit available immediately, you need to buy the land with 50% down payment and close your transaction. And after you obtained complete plan and permit, then you need to apply a new construction loan. On these scenarios your initial cost will be a little bit more but you don’t have any choice and this is how it works.

The interest rate for land loan is based on prime rate plus a margin and term will be between two to five years period.

Usually, when you apply for construction loan, you don’t have to make any monthly mortgage payments. In the initial cost breakdown that you are submitting to the lender, the interest reserve, insurance, property tax, closing cost, Escrow, title, appraisal, Phase I report, permit fee, architectural design fee and actual building cost (which includes hard + soft cost) is included.

Most lenders may require a Phase I environmental report or geological report to make sure that the land isn’t contaminated and dirt is strong enough.

Pay attention to lenders requirements and pre-requisites.

1. Condominium Projects
2. Single-Family Tract Home
3. Office Building
4. Shopping Center
5. Industrial Building

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"Real Estate Broker - CA Bureau of Real Estate".

CAL BRE. 00667328 NMLS 298861 / 729817

Terms and condition are subject to change without notice. Some restrictions may apply.

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