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  • #687

    RobertEWilson4
    Participant

    Sometimes our banks don’t like to include interest reserves as part of the construction loan. Is there a way to remove the interest reserve from the Loan to Cost Calculation and to have the loan based on the construction costs instead of the construction costs + interest reserve? This would make the interest reserves as an equity requirement instead of a loan requirement.

    I’ve played around with the latest beta to see if there is a way to work around this and I was unable to figure out a way without making major changes.

    If there isn’t an easy workaround, this would be a nice toggle feature.

  • #697
    mm
    Spencer Burton
    Keymaster

    Hi Robert,

    Thanks for the request. This has actually already been built into the model, but perhaps not explained properly. In the latest version of the model I’m about to release, I’ve updated some of the titles to make this more clear. I’ve also added a LTC (w/o Int. Reserve) calculation to the S&U tab so you can size the loan without the Interest Reserve if necessary.

    You can find the breakdown of Construction Loan without Interest Reserve and the Interest Reserve in columns U, V, and W of the S&U tab. As mentioned, in column V you’ll find a % of cost metric to help you size a loan where the interest reserve is covered by equity.

    The only wrinkle here, is to you’ll need to do a quick side calculation before using the Construction Loan macro to size the loan. So for instance, if you’re solving for a 65% LTC loan without interest reserve and you have beta v0.6.5 or newer. Enter a value in cell E9 on the S&U tab (LTC assumption with interest reserve) that is several percent above 65% (e.g. 69%) and click the ‘Run Const. Loan Macro’ button. Then make note of the LTC without Interest Reserve (V10) and see how close you are to 65%. Keep changing the value in cell E9 and running the Const. Loan Macro until the LTC without Interest Reserve equals 65%.

    Best!

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