Hello:
Does anybody knows any real estate finance book on condos (I assume the difference between multifamily is that condos are sold), usually here in Mexico, we don't operate under multifamily assumptions.
So trying to learn a little bit more on the subject. Any input is appreciated.
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I have not come across any specific RE finance books on condos but its fairly straight forward in analyzing if the project will work. Condo sales revenue less land and development costs = profit. There are 1000 ways to structure the deal to get there but a typical structure:
25% sponsor equity funds land, entitlement and design costs Bring condos to market via marketing the floor plans, renderings and programing/amenities Hit construction lender mandated 50-60% presales, sign for construction loan at 60% LTC Use purchaser deposits to fund the remaining 15% equity required Construct, close units, payoff construction loan as units close, pay equity investors, HOA takes over common area management.
Create a cash flow for cash management and equity returns. Obviously extremely simplified but you get the concept.
Hey, thanks a lot it's pretty similar to what I'm trying, the only difference is that we usually need 40-50% LTC (hard to get banks in Mexico to lend you more), a few questions:
What do you mean by programing in porgraming/ammenities.
Also probably a little off-base but I'll ask since we're here already, in your flows do you take into account inflation?
Finally in this type of building do you suggest to calculate NPV or IRR or both?
Thanks
Programming/amenities: gym, pool, ground floor retail/restaurant, owner's lounge, common areas etc. No inflation taken into account unless it is a multi phase long build-out period Our investment metrics on a project level are 2X equity multiple & 20+ IRR. We also pay ourselves a development and marketing fee
Sounds like you've done this before? Personal investments or with your firm? ...if you don't mind me asking.
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