New-York tribune., 1909-01-13
f0ANS FOR BUILDERS
EOW THEY ARE OBTAINED
r. Richard DaUis Tells Realty School
4boat Such Transactions.

,,.ss-d Davis, Of A l. Mordecai & Son. spoke
,irnt on The Financing of Building Opera
.~ before the realty school Of the West Side
-e Mems Christian Association It the
- address Of a OF five lectures on
T5,.e and permanent loans and building.
~p. ~ NJ the lectures will be delivered by Thomas
xsvsIls Of Neville & Bagge, architects. Many
l,ov-n real estate brokers, investors and build
:. Eere present
-, navts said the real estate broker has TO deal
- with either vacant property which he sells
g Improvement with the completed building.
=. therefore obvious that q knowledge of the
.,od Of financing building operations is neces-
adjunct 70 his business. and that a knowledge
= che methods Of construction in general use
-,e architectural necessities of the speculative
- ere also Of great interest and value him.
A. rsvis also said IN part follows:
.srbe speculative builder and the building con-
..,or are a part of different branches Of the
r4tne industry. The building contractor puts up
- bouse with money advanced to him by the
..,,s-or OF owner. The speculative builder not
" builds the house but borrows the money on
s,s own name and credit TO build 1t with The
r5i,g contractor is primarily and only q builder,
~ ,nr fnancier as we'll
@rp,ldiug loans on land here are generally made
,.r me wear. and are usually at per cent
THE huilding loan operator and the building
= s,-esror are also two distinctly different per
The building loan operator is one who owns
,s uhich he desires 10 sell 10 builder for i'm
.rs-,en5 To induce the builder to pay him a
bs-snttzI advance in price for the land above the
s+ % him. he offers him a more less liberal
-, without particularly considering whether his
-o-sage security is conservative one or not
THE building loan investor is one who wishes
,rs zood interest return on his money and takes
=. risk Of making a building loan 10 obtain the
r~r 7er cent which building loans generally net
~.,uays bears in mind the necessity for adequate
,-1z- MS Nc a
,,-ss n take IS that OF builder failing to com
rls. his buildings. and OF the lender having 70
so-s,1osa 2 mortgage upon an unfinished building.
snd possibly complete Il himself
PERFECTTNG bN OPERATION
let Us imagine that a builder whom we know
owns corner plot Of ground 100 feet square anu
that re desires improve it with a SIX story So
called elevator apartment house. He has pre-
y3ousIv purchased the land for 10000. He paid
ZOO cash and gave back to the seller purchase
money mortgage for $4,000 He needs money 10
assist him II building, and he goes to oullolns
loan company end asks for loan Of Ssn0p' to De
made to him IN payments as the building pro
crosses.
The building loan investor figures that the land
&c north 100000 and that the building will cost
raO0o making the total cost Of the property
10000 He considers that II he lends the builder
eaUO subject TO q ground mortgage Of $4,000 that
the property must be security loan of $4,000
ysIue He further figures that when the building is
completed the builder will be able to borrow as
permanent loan more than $4,000.
If he is reasonably disposed, he offers the builder
loan ot s71.ono. subject to mortgage for sao, ,0pO
making total claim the property Of $4,000,
about tzothrds OF the estimated cost value OF the
property.
Although the mortgage upon the land makes
NJ difference in figuring the total Of build
1E loan 20 be made. il makes material difference
Il the way in which The building loan payments
are advanced. II The land is originally mortgazed
fr ali il Is worth. Il is obvious that the builder
has no equity in his property until he has reached
such in the construction Of it to create
Toy instance If this same 1oo-foot plot had q
mortgage for $4,000 it. or for all II is worth
then II would be until the building vas inclosed
thst II could said that he had created a rea-
sonable equity Of. say. $4,000 The property would
then be worth sl60Atl. and man might reasona-
biy lend tRo-trirds Of the cost at that time.
This is the theory on which building loan pay
rents are generally arranged Another and a more
conservative method is. hold back enough money
at al times so that the balance coming due will
5e sufficient TO complete the building