Real Estate Development & Credit Scores

by Cynthia
(West Olive, MI.)

Hi Colm,

I have always wanted to start a business as a developer and build a few exquisite hotels but, my financial burdens have been quite the road block, and my credit scores are not so great.

With a situation as challenging as mine, what's your advice on how to get started?

Should I maybe look into a joint venture? Also, according to my interest, which of your three courses do you suggest I take first?

Hello Cynthia,

Your frank assessment of your financial position sets out the Order of Attack on the issues you face.

1. Credit Rating - getting this into a totally clean clear slate is Nunber 1.

Until you do that you will not be able to borrow money from the financial system - there is no question about that, so make it your Numero Uno Priority.

Paying the money owed is one thing BUT making sure all evidence of past problems is actually removed from the file is to be followed through.

2. Saving - once the credit rating is clear, you will need to have some equity to put into a development.

How Much Equity is a question I am asked?

Here's a quick assessment. Let's say you were going to build 2 Townhomes that will sell for $300,000 each; so total sales income is $600K.

Let's assume you want to make 25% profit on all your costs - well 25% of $600 = $150K, so the balance is $450K and $450K is what you will need to buy the land and build the 2 Townhomes, right.

That $450 comes from the lender (borrowings) and you (equity).

Let's assume the lender will lend you 80% of the $450K or $360K, then you need $90,000.

Now that is just for developing 2 townhomes, so all you do is ramp up that equity for larger developments such as a hotel.

So saving is No. 2 on the list.

3. To get to the point of actually developing a real estate development project after all that saving you don't want to make any mistakes, so in the mean time you have to learn all the skills that will make you a real estate developer and that is what I teach people all over the world.

Learning the business is the "foundation" of all business activity and real estate development is a "business."

So before risking your hard saved "equity" it is a good idea to minimize all forms of risk from the deal and that is what I have done all my life and I have never had a development lose money in $1.2 Billion worth of projects.

So I highly recommend following your passion based on knowledge and to use the time you have in achieving (1) & (2) to study and to research the market.

That is why 30 lucky people are joining me on June 6 & 7 for 3 days at Trump International Hotel & Tower in Las Vegas for my Workshop.

Bye Cynthia - hope my answer helps you.

Colm Dillon

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Jul 24, 2015
Great answer Mr. Colm. NEW
by: Jordan Melton

It was really glad to read your answer Mr. Colm. Arranging capital is the first thing to do before starting any business which needs lots of saving. I am completely agree and satisfied with the answer you have given here. Actually I am also little bit confused regarding my career plans. I am interested for some insurance or financial business and I think it would be profitable for me but I am also lacks of money. I have chosen a Business Coach to help me out throughout my business decisions. We always make discussions and he is the one always give me the right and reasonable directions. It would be nice if you will give some suggestions to me as you have given to Cynthia. Waiting for your respond! Thank you.

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