AboutMike Fortunato Expertise Can answer questions on all aspects of commercial real estate management, including lease administration, eviction issues, financial reporting and budgeting, asset valuation/enhancement, marketing & leasing, and site maintenance and repairs. 20+ years of real estate management.
Experience 20+ years in commercial management. Current own and operate property management company in southern California.
Question Hey Mike,
Do you have any experience with construction loans on residential property? For example, lets say a developer gets a loan on a large piece of land which is subdivided and he builds on each of the individual lots. The construction loan should be released with respect to each individual subdivided lot after each sale. My question is, do you know what type of interest rates are charged on construction loans and do you know how to calculate the per day/month/etc. interest on each individual subdivided lot? (i.e. how much is it costing a developer per day when they cannot sell a unit?) I understand taking the interest per day and divided by the number of lots, but I'm more interested in factors that I(non-finance individual) would not consider such as tax depreciation, etc.
Thanks, Mike Powell
Answer Your simple calculations on interest per lot would be fairly correct. the tax implications get into in-depth calculations, but really don't affect the bottom line to any great degree (you would probably need a CPA to help you with that). Interest rates vary by region, but out here in southern California the rates for residential construction loans are in the 9 - 9.5% range, and maybe a bit higher given the recent problems in the lending market.
