| It’s true it costs money to then hopefully make it. :) Architecture, civil engineering, and other design and permitting fees can easily be 7–10% of the overall cost of smaller projects. Even in large projects they’re often 4-5% or more, and the number of billable hours for complex impervious surface and stormwater management adds up fast, as do engineering stamped plans for structural and other factors. Most cost here is also incurred fairly early before you have any vertical construction done — Phase 2 in a program after land acquisition. So you feel like you’re spending a ton on paperwork and you can’t see anything yet. You CAN spend a bit of money even before land acquisition on quick feasibility studies but in U.S. terms for something like a residential, small commercial or light industrial project every parcel you go “I like that, can it work?” you are dropping $15-50k during a 45-120 feasibility period. Should it 100% not work out you are NOT getting reimbursed that by the selling party. You’re out the money. Even within 90 days you may find some uncertainties like SEPA approval won’t close before you have to say deal or no deal on the parcel acquisition. This is quite unlike massive companies doing business where the land may not change hands until essentially every approval is locked in (but should it not work out the buyer may be out millions in engineering fees paid to try and make it work). Borrowing to buy land and then borrowing more to build something is also treated very differently by most lenders. It carries tremendous uncertainty versus you buying a preexisting lot and structures which they know how to value. That’s fundamentally something that causes unwillingness to lend, or changes the rates and down payment or security terms. In contrast with a conforming mortgage for a SFR (single family residence) at 6%, borrowing to build (a construction loan) can be 10-14% APR, often secured via personal guarantee and other assets you possess, and then you have to convert to a personal or commercial mortgage after you complete building what you wanted. Borrowing to buy the land is even more complicated again — you very often must be able to pay cash for land, and then just borrow to do the construction. Borrowing for both especially with limited assets to secure against will always be a polite “Sorry; we can’t help.” |