Appendix C | BUSINESS PLAN FOR PROJECT DEVELOPMENT | 249Introduction
This is a request for a loan of $30,000 for the purpose of improving a single-family
residence at 2246½ Hamilton Street, Chicago, Illinois. This house has been condemned
by the City because of faulty plumbing and wiring, and because it has been unoccupied
for about three years. As a result, there is substantial work to be completed before the
house can be legally and profitably sold. According to City inspectors and a private
structural engineer, the house is basically sound, except for the items referred to.
Specifically, the City has stated they will issue an occupancy certificate once the tagged
items are completed to their satisfaction.
Upon completion, the house will have a market value of $120,000, based on
comparable sales in the area. Since I have acquired the house for $60,000, the proceeds
from the sale of the house will be more than enough to pay the existing note on the
house and to pay back the new loan.
Market Value of the House on Completion
Although I have not yet acquired a formal appraisal of the value of the house, a study
of recent sales of comparable property in the area supports the value of $120,000. This
area of Chicago is undergoing the “Gentrification” process whereby younger, upwardly
mobile families are buying older houses and fixing them up to live in or resell. People in
the market appear to be willing to pay a premium for a rebuilt house, both in terms of
selling price overall and on a square-foot basis. An appraisal can be obtained from any
number of qualified appraisers at the lender’s request.
Terms of the Expected Sale
Lenders in this neighborhood have been lending 80% of the appraised value of a first
mortgage. Buyers normally expect to make a down payment of 10% to 15% of the
selling price. Many sellers are willing to carry a second mortgage on the houses for up to
10% of the selling price. This loan request is based on that set of assumptions about the
terms of the resale.
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