Multi-Unit apartment construction

Multi-Unit apartment construction 1500 1125 BERNSTEIN FINANCIAL SERVICES 2019

Cash flow from first shovel to rent stabilization:

Having enough funds to handle cash flow disruptions during an apartment construction project can save money, time, trouble, and perhaps the entire project.

In the construction phase, the construction loan company will constantly inspect to see that the progress of the project matches the request for funds to pay vendors for what they have completed.  If there is a stall in the approval process and funds get delayed.  This means vendor payments get delayed and possible walk outs by vendors.  Having some extra funds in the project initially can allow for payments to vendors who cannot wait.  Then, when the funds arrive from the lender, the reserve is restored.

This issue raises its ugly head again when construction is completed, and tenants are beginning to occupy the units.  If there is not a reserve of funds to handle the rent stabilization period, a cash call from the investors must be addressed (or a bridge loan at a high interest rate).  It makes the management of the project look bad, and it costs the project in terms of loan interest and delay of rents.

For example, rents may be delayed while funds are being sought to build out a demo unit.

Finally, after the rent has stabilized, if there is no reserve left, there will be no start to a reserve fund for future repairs and improvements

Plan the cash from beginning to end!