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| | Senior Housing
Hard Money Loans - Continued...
Senior
housing is the only industry where you have the opportunity to sell a living
unit twice (once to an investment pool and once to the future resident who will
be purchasing an entry-fee estate and not a fee-simple real estate interest) and
that creates, cet. par., powerful potential outcomes. Using the
example from the previous page, consider the steps in takes to get you to the
point where a hard money loan is manna' from heaven...
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Create
a capital funding plan that makes sense. We used the term "market
rate" in italics (previous page) to describe an
entry-fee project that is aimed at the median net worth of likely pool of
prospective residents. This would lead to a prototypical project, cet.
par., having a total price tag of around $80,000,000. The project
is split into two (2) phases of development so as to make your task easier
(as we will demonstrate here). The first phase works out to be, cet.
par., around $44,000,000 to finance the hard costs of construction, soft
costs of construction, project financing, carrying costs and land
acquisition costs (an all-in number). Now we can chop up that
$44,000,000 into bite-sized morsels we can actually swallow. |
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Developer
then invests in a commercial real estate syndication and sells a portion of
the new construction living unit inventory to the real estate investing
public. This raises $12,000,000. The transaction is a
"stated yield" deal, so the developer is really borrowing from his
own future - a great way to leverage income and it will, cet. par.,
work for this purpose quite nicely. This leaves us $28,000,000 to
finance. |
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Developer
then commences the pre-sale cycle for the entry-fee sales. This raises
a total of $20,000,000 when all units of the first phase are sold out.
This means the funds come into play at the end of the construction phase -
in other words, the $20,000,000 in entry-fees represent the last $20,000,000
in financing needed to finish the construction phase. This leaves us
with $8,000,000 to get funded. |
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Most
hard money loans will be for 50% of the 90-day resale value of the land and
50% of the construction. This means the $44,000,000 deal may qualify
for up to around $20,000,000 in hard money financing, but you did it the
Rainmaker way and only needed to fund $8,000,000 to get the job done. |
Did
we mention we were expert consultants in the field? Can you see why?
Talk to a Rainmaker Marketing Corporation consultant today and get a solution that will make some rain for your
company. | |
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Do
You Know The Secret?
When it comes to commercial real
estate development finance, it doesn't matter whether you need to raise
$5 million or $50 million, the out-of-pocket costs, advance fees and
project due diligence costs will always require the same relative
investment dollars the promoters have to fund. Do you know what
that amount is? Do you know the Secret? |
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