In order to get our construction loan, we need to have 80% of our units presold. Presuming we will have a 28 unit project, this means that in two years from the time we move beyond feasibility with one piece of land (currently we hope this will be next month, 9/02) we will need to have 23 households who have put at least 5% down on their units and have prequalified for the mortgage they will need.
In order to achieve these goals, we have created a timeline with appropriate milestones. The following timeline includes information on when current members will reach their 5% and when current associates will reach their 5% if they choose to join. For a graphical representation, see http://www.mosaic-commons.org/catwork/membership%20goals.pdf
Get land (9/02): 5 paid-up households (18%)
1. San & Kai (small 3 bdrm)
2. Dwight & Steph (large 3 bdrm)
3. Cat & Dave (4 bdrm)
4. Roxanne (2 bdrm)
5. Ken & Christie (small 3 bdrm)
6 mos later (3/03): 9-10 paid-up
households (34%)
6. Greg (2 bdrm)
7. Sarah (1 bdrm)
8. possible: associate (1 bdrm)
9. open: ______________
10. open: ______________
12 mos later (9/03): 14 paid-up households
(50%)
11. John & Judy (small 3 bdrm)
12. possible: Rosa (1 bdrm)
13. possible: Marty (small 3 bdrm)
14. possible: associate (small 3 bdrm)
18 mos later (3/04): 18-19 paid-up
households (66%)
15. open: ______________
16. open: ______________
17. open: ______________
18. open: ______________
19. open: ______________
24 mos later (9/04): 23 paid-up households
(80%)
20. Rick & Kim (2 bdrm)
21. open: ______________
22. open: ______________
23. open: ______________
In order to reach these membership goals, new members will be asked to contribute at least $2,500 up front and sign a promissory note specifying a payment schedule of up to 6 months to reach the projected 5% minimum for their unit type. Upon reaching the 5% mark, all households are required to get a prequalification letter for the projected amount of their mortgage, and provide a copy of this letter to the Finance Team.
| Unit Type | Initial
Pre-const Price |
Rounded
5% |
Minimum
Payment |
Remainder |
5
Monthly Payments |
| 1 bed | $161,192 |
$ 8,050 |
$2,500 |
$ 5,550 |
$1,110 |
| 2 bed | $180,667 |
$ 9,050 |
$2,500 |
$ 6,550 |
$1,310 |
| 3 bed (small) | $206,735 |
$10,350 |
$2,500 |
$ 7,850 |
$1,570 |
| 3 bed (large) | $263,969 |
$13,200 |
$2,500 |
$10,700 |
$2,140 |
| 4 bed | $324,156 |
$16,200 |
$2,500 |
$13,700 |
$2,740 |
As now, people may respond to cash calls both before and after reaching their 5% minimum. Money over the 5% minimum will continue to be credited in Bucket 2, at a 15% APR before we have our zoning approved and a 12% APR after we get our zoning approved.
New members are welcome and encouraged to contribute their 5% minimum equity payment (Bucket 1) in one lump sum upon joining. Additional equity payments (into Buckets 2 and 3) will be accepted using our cash call protocol .
Any existing members who wish to complete their 5% minimum equity payment (Bucket 1) by making a lump sum payment are welcome to do so at any time.
Members who take out a home equity loan, property mortgage, or 401k loan for the purpose of contributing to the project should park any money above their 5% minimum in their own private account (such as a money market fund) and contribute it during regular cash calls.
Some loans, particularly 401k loans, may require that the entire lump sum be paid out to the LLC at one time. If a member takes a loan with these requirements, we will establish a "Parking Account" (such as a money market fund) to accept such payments outside the buckets system. Interest earned on this money will be credited proportionally to each member's balance in this fund.
During a cash call, the finance team will automatically bid the full amount each household has in the Parking Account (or the total amount of the cash call, if smaller). Households may bid more on a cash call than they have in the Parking Account by notifying the finance team. All bids will then be handled normally as per the cash call protocol.
Example:
Sandy takes out a loan against her 401k. The loan provisions specify that all of the money ($40,000!) has to be paid in a lump sum to the entity she is going to buy her home from. So, the LLC accepts the full $40,000. $10,000 of that is her 5% minimum (Bucket 1). The remaining $30,000 goes into the Parking Account, where it will earn money market interest while it waits for an opportunity to go into Bucket 2 (or 3).
The next month's cash call is a doozy: $25,000. Since the cash call amount is lower than her full balance, the Finance Team bids $25,000 on her behalf. Other members also bid quite a bit for a sum total of $40,000. Sandy's proportional contribution will therefore be $15,625, which now goes from the Parking Account into Bucket 2. Sandy's balance in the Parking Account is now $9,375.
The following month we have a cash call for $15,000. In two months Sandy has earned $100 in interest on the money in the Parking account and has a balance of $9,475. Sandy lets the finance team know that she would like to bid $525 on top of what remains in the Parking Account, for a total of $10,000. Other members bid precisely $5,000 this month, so everybody ends up contributing exactly what they bid. Sandy's balance in the Parking Account is now zero.