Building an Infill - a couple of questions

[nzwasp]

My wife and I, and a couple of friends want to subdivide an inner city lot and put a duplex infill on it.

We thought this would be as easy as buy a lot (with mortgage) tear down the house, get all the permits etc and then build the infill. However after talking to our mortgage broker last night we learn't that you cant get a mortgage for a lot with an existing house on it and tear it down until the mortgage is fully paid. So we are left with a couple of options:

1st option would be to buy a lot with house e.g for 400k and rent it out whilst saving the total amount of the old lot (400k) and then building after we owned it.

The 2nd option would be to find a developer who already bought the land and then build our infill duplex on it.

Does anyone know any developers that do this?
Do these developers allow you to control the design of the house? we are looking more for a prefab home like Karoleena - however I dont think they purchase land for you.

Is there any other type of loan that allows you to secure it against something else rather than the house we want to tear down?

And if anyone knows some blogs of people that have been through this process in Alberta that would be great too - web searches havent found answers to any questions.

[lauphman]

Theres a few ways around owning the original lot outright I just found out a few weeks ago, but any way you try to do it on your own 200g's in the bbk account is needed. Talk to a mortgage broker that specialized in builders mortgages

[nzwasp]

I wish I had 200gs in the bank.

I also have an existing mortgage and house. So this would be in addition to that.

Any idea where I'd learn this info that you learned? The conditions for a construction / Builders mortgage we were looking at were from TD.

[Rarasaurus]

Another option would be to get investment capital outside of the banks. Agreement for 2 years for lets say 1 mil. Paying lets say 8% a year. At the end of construction when you have two titles you and your friend can mortgage both sides and pay out the investors.

I know of a guy that has gone this route for a renovation project.

[lauphman]

Private investors are going to want more then just the 8% a year unless it's your buddy.

[yellowsnow]

yeah, banks don't like it if they give you a mortgage, then you tear down the house leaving them only the land as collateral.

you could do a loan on just the land itself.

There is also something called a construction draw mortgage. However, you still need to prove you have at least 35% of the final value available in liquid assets. maximum time is 1 year to complete the project.

[RawB8figure]

Originally posted by lauphman
Theres a few ways around owning the original lot outright I just found out a few weeks ago, but any way you try to do it on your own 200g's in the bbk account is needed. Talk to a mortgage broker that specialized in builders mortgages

Would you mind sharing who this can be done. PM me if you want. The only way I have been able to do it is to own the land and borrow the rest for construction.

[bspot]

I'm going to slide a second question in if the OP doesn't mind.

Can an attached infill be built on a 45'x110' R-2 lot? Or is that too narrow?

[nzwasp]

I think so. Although the lots that Ive wanted are 49-50ft wide and 120 deep. If you sacrificed a little width in your attached duplex and some garden you could do it.

I dont know the rules around subdividing an R2 lot.

If anyone can give me a break down of R1, R2, R-C2 etc from city of calgary that would be good.

Oh the question wasnt for me and no i dont mind....that was my opinion.

[Rarasaurus]

Google city of calgary land use bylaw:

http://www.calgary.ca/PDA/DBA/Pages/Calgary-Land-Use-bylaw-1P2007/Calgary-Land-Use-Bylaw-1P2007.aspx?redirect=/landusebylaw

Link has all criteria for land use designations.

[max_boost]

Well not much help but when you build the garage, please do yourself a favor and build it a couple meters in. Yes you'll sacrifice a bit of your non existent yard but the alleys are so narrow you will want to do this.

[nzwasp]

This is the breakdown of the zoning.

http://www.calgarymike.com/real-estate/tag/calgary-zoning-regulations/

Couldn't find it inside the calgary city website.

[Recca168]

Originally posted by bspot
I'm going to slide a second question in if the OP doesn't mind.

Can an attached infill be built on a 45'x110' R-2 lot? Or is that too narrow?

It'll be pretty narrow. Assume you don't have a corner lot you need 4' for a side yard on each side of the building. After you factor in walls you'll probably only have ~17' width per side.

[bspot]

Cool, thanks guys. Not planning on doing this in the next few decades (the building on the lot is fully renovated, probably look at adding on if anything) but I've always been curious.

[nzwasp]

So I have heard of some people who get a mortgage for an r2 lot and secure against the existing house then tear the house down without telling the bank, then get a construction mortgage and build an infill.

2 questions, how common is this?

What are the implications if the bank finds out that you tore down their security?

It all sounds pretty dodgy.

[90accord]

i know there is a company called Bruce Built homes that does this i have wired a few of these in fills for them.

[JordanLotoski]

Where are you going to find an r2 lot for 400k?

Killarney - 500,000
Richmond park-550-600
South Calgary -550-600
Altadore-625+
mount pleasant - 500,000+
Tuxedo 500,000+

The only possible community I can see you getting 400 or close is Montgomery/bowness.

Let me know if you need help, I know quite a few builders and I'm always hunting for r2 land.

I also just purchased an inner city lot, and will be building a home ASAP....pm or call me with any questions

[tpurcell4]

Originally posted by nzwasp
So I have heard of some people who get a mortgage for an r2 lot and secure against the existing house then tear the house down without telling the bank, then get a construction mortgage and build an infill.

2 questions, how common is this?

What are the implications if the bank finds out that you tore down their security?

It all sounds pretty dodgy.

Basically what will happen in this scenario is the lender would call the loan should they find out.

I recommend a few of options for clients who are looking to to do infills. Going through a bank, which you have already looked into, so I won't bore you the details on that as they are all pretty much the same.

We have access to a private lender that specializes in these types of properties. They would recommend that you you purchase the home as you would any other home to live in or rent out (as it is a much cheaper route to take), should look at short term loan (1 year) or open mortgage, then they would go on as a second mortgage after you have purchased the home.
- They will go up to 80% loan to value on the build cost and will need your plans, build specs, budget and potential selling price (end value) up front to asses the loan.
- They will allow as many draws as you like
- The total fees will be 4.5% (lender fee 3.5%, broker fee 1%), plus any appraisals, inspections, etc (they do have an in house inspector)
- interest rate is 14% on drawn amount (thus why getting a traditional mortgage is cheaper)
- Should your current first lender call the loan for having torn down the house they will buy it out (will be at the 14%), but they have never seen this done.
- we will put together a good exit strategy to get you into a cheaper mortgage as soon as you are close enough to completion to consider a refinance plus improvements as the payments on a nearly full drawn mortgage at 14% will start to get pricey.

Cheers,

Todd

[nzwasp]

Originally posted by tpurcell4


Basically what will happen in this scenario is the lender would call the loan should they find out.

I recommend a few of options for clients who are looking to to do infills. Going through a bank, which you have already looked into, so I won't bore you the details on that as they are all pretty much the same.

We have access to a private lender that specializes in these types of properties. They would recommend that you you purchase the home as you would any other home to live in or rent out (as it is a much cheaper route to take), should look at short term loan (1 year) or open mortgage, then they would go on as a second mortgage after you have purchased the home.
- They will go up to 80% loan to value on the build cost and will need your plans, build specs, budget and potential selling price (end value) up front to asses the loan.
- They will allow as many draws as you like
- The total fees will be 4.5% (lender fee 3.5%, broker fee 1%), plus any appraisals, inspections, etc (they do have an in house inspector)
- interest rate is 14% on drawn amount (thus why getting a traditional mortgage is cheaper)
- Should your current first lender call the loan for having torn down the house they will buy it out (will be at the 14%), but they have never seen this done.
- we will put together a good exit strategy to get you into a cheaper mortgage as soon as you are close enough to completion to consider a refinance plus improvements as the payments on a nearly full drawn mortgage at 14% will start to get pricey.

Cheers,

Todd

So what is this private lenders security for the loan? the land?

[tpurcell4]

^^
They are looking at the current and additional equity in the home after the improvements. How much are you looking to put down?

[nzwasp]

Not sure as im thinking of building new now.

I think we were thinking 50-60k down or 10% for one side of an infill duplex which we thought would cost us 600k (we were going to split a lot with our friends)

[Euro_Trash]

Along the same lines - when you hear quotes of $250-300/square foot, is that high quality finishings, or is that before you start adding the extras?

[nzwasp]

In the experience of looking at doing this for the past couple of months we were quoted 210 per square foot and thats before upgrades (so just a standard spec).

Also I dont know how easy it is to build a 1800-2000 square foot infill with a budget of 400k (200$ per square foot) with high end stainless steel appliances, 9 foot basement and main ceilings, granite bathroom and kitchen.

[JordanLotoski]

Originally posted by Euro_Trash
Along the same lines - when you hear quotes of $250-300/square foot, is that high quality finishings, or is that before you start adding the extras?

250-300 is high end finishings. I'm building a home right now, I'll be in around 260 a sq foot, then 50 or so in the basement.

[nzwasp]

Originally posted by JordanLotoski


250-300 is high end finishings. I'm building a home right now, I'll be in around 260 a sq foot, then 50 or so in the basement.

How many square feet is the home that you are planning? is it attached or not?