Guidance on projecting the debt-funding requirement on a single-family master-planned community.
I am underwriting a residential development site designated for horizontal development/single-family homes.
The houses will sell during the construction period, and the investor is putting up 30% equity to fund the project construction cost.
I am having trouble projecting the debt funding. One plain vanilla approach I understand is to take the loan on the entire 70% shortfall. But it just doesn't sound right.
I have been underwriting MFA on a built-to-hold basis. My approach to project debts uses DSCR of 1.2X of stabilized income or 65%-70% of the project cost - whichever is lower.
Now in this horizontal development on a built-to-sell basis. I just can't find the appropriate income-based approach.