Buying a land

[cmattric]

Hi everyone,
I have a question. Is it possible to get a mortgage on a land? Particularly a multiple-appartment complex on a residential lot. My purpose is to build a house or find a home builder to do it. What are the diffuculties about financing this kind of project?

Thanks
Mehmet

 

[Thomas Beyer]

QUOTE (cmattric @ Jan 22 2009, 08:27 AM) Is it possible to get a mortgage on a land? Particularly a multiple-appartment complex on a residential lot. My purpose is to build a house or find a home builder to do it. What are the diffuculties about financing this kind of project?
the issue is no cash flow.

yes you can loans with security .. such as land .. it is usually more expensive than an income property and the loan to value is lower .. but 50% LTV @ around 10% is doable or 75% at 12-15% ..

you can also draft a development plan, and with building approval and detailed cost you can get a construction loan .. up to 75% of cost (land + building cost) .. possibly secured against add`l collateral such as your own home .. then it may be prime + 1 or prime +2 %

 

[RobMacdonald]

Hi Mehmet,

By your post, it looks like you`re wanting to build a house on land that already contains a multi-unit property. Is the exisitng proerty mortgaged? Are you subdividing? Is there equity as the property currently stands, and what would be the completed value of the property plus new improvement?

Those are some of the questions to consider, but there are some financing options, just not as straightforward.

 

[cmattric]

Actually it is very clear that when you have an existing property on a land, and turn it into a multiplex property, mortgage or other types of financing would be available.
What I meant was building a house on a property is rather one-sided investment. You buy the land build the house, and try to find a buyer with $500K. On the other side building a complex with 6 units (Where I saw these types of buildings are in Quebec/Longueuil) with almost same size of the land. And sell them for each 120K+. Find 6 people, may be live yourself in one unit. I am sure anybody would buy an appartment with a value of $120K in Calgary, or Edmonton.

I know it is easier to find a builder, get a mortgage, and get your house in couple of months in new development areas.

Mr. Beyer posted really good information. But is there any other aspects of this approach that I am not aware of.

Thanks in Advance
Mehmet