# Financing Model

**Goal**: Raise $1.1M to build seed hex, incorporate town, and establish sustainable operations

---

## Capital Requirements

### Land (10 acres, Brown County)
| Item | Cost |
|------|------|
| Purchase (10 acres @ $5,000/acre avg) | $50,000 |
| Closing costs, survey, title | $8,000 |
| **Subtotal** | **$58,000** |

### Seed Hex Building (Single-Story)
| Item | Cost |
|------|------|
| Foundation (slab-on-grade) | $45,000 |
| Structure (central column + trusses + roof) | $120,000 |
| Exterior envelope | $60,000 |
| Commons build-out (kitchen, bathrooms, lounge) | $85,000 |
| Pods (38 units, prefab) | $380,000 |
| MEP systems (electrical, plumbing, HVAC) | $95,000 |
| Solar + battery (50 kW + 40 kWh) | $65,000 |
| Site work (well, septic, grading) | $35,000 |
| Permits + fees | $15,000 |
| Contingency (10%) | $90,000 |
| **Subtotal** | **$990,000** |

### Operating Reserve (Year 1)
| Item | Cost |
|------|------|
| Property taxes (estimated) | $6,000 |
| Insurance | $8,000 |
| Utilities reserve | $12,000 |
| Maintenance fund | $10,000 |
| Legal/accounting | $5,000 |
| **Subtotal** | **$41,000** |

### Total Capital Needed
| Category | Amount |
|----------|--------|
| Land | $58,000 |
| Building | $990,000 |
| Operating reserve | $41,000 |
| **TOTAL** | **$1,089,000** |

**Round to: $1.1M**

---

## Capital Stack

### Tier 1: Member Equity (40% = $440,000)

| Structure | Details |
|-----------|---------|
| Share price | $11,000 per founding member |
| Shares available | 40 |
| What you get | 1 pod occupancy right + 1 vote + equity stake |
| Buyout option | Share is transferable/saleable after 2 years |

**Founding member benefits**:
- Fixed monthly rate (no rent increases for 5 years)
- Governance vote in town decisions
- Profit share if town expands and sells additional hexes
- Priority for family/friends to join waitlist

### Tier 2: Impact Investors (35% = $385,000)

| Structure | Details |
|-----------|---------|
| Investment minimum | $25,000 |
| Expected investors | 10-15 |
| Return | 4% annual preferred return |
| Term | 7 years, then buyout or convert to equity |
| Security | First lien on land + building |

**Investor pitch**:
- Proven model (intentional communities are growing)
- Real asset backing (land + building)
- Social impact (affordable housing, sustainability)
- Exit via member buyout or expansion profits

### Tier 3: Construction Loan (25% = $275,000)

| Structure | Details |
|-----------|---------|
| Lender | Local credit union or CDFI |
| Term | 18-month construction, then 15-year amortization |
| Rate | ~7-8% (estimated) |
| Collateral | Land + completed building |

**Lender considerations**:
- Brown County Bank (local, may be receptive)
- First Farmers Bank & Trust (ag experience)
- Indiana Members Credit Union
- CDFIs: Indiana Community Development Fund

---

## Legal Structure

**Recommended**: Indiana Limited Cooperative Association (LCA)

| Feature | Benefit |
|---------|---------|
| Member-owned | Residents have voting rights |
| Investor shares | Separate class for capital investors |
| Flexible governance | Can adapt as community evolves |
| Cooperative principles | Aligns with sustainability mission |

**Alternative**: LLC with Operating Agreement
- Simpler to set up
- Less statutory protection for members
- Works if < 35 members initially

---

## Monthly Operating Budget

### Revenue

| Source | Amount/month |
|--------|--------------|
| Pod fees (38 pods × $500 avg) | $19,000 |
| Commons usage (events, workshops) | $1,000 |
| **Total revenue** | **$20,000** |

### Expenses

| Category | Amount/month |
|----------|--------------|
| Mortgage/debt service | $4,200 |
| Utilities (electric, water, gas) | $2,500 |
| Property tax | $500 |
| Insurance | $700 |
| Maintenance reserve | $1,000 |
| Management (part-time) | $1,500 |
| Internet/streaming | $300 |
| Supplies (cleaning, kitchen) | $400 |
| **Total expenses** | **$11,100** |

### Surplus

| Item | Amount/month |
|------|--------------|
| Operating surplus | $8,900 |
| Annual surplus | $106,800 |

**Use of surplus**:
- 50% to expansion fund (save for Hex 002)
- 30% to investor preferred returns
- 20% to member equity (buy down shares)

---

## Break-Even Analysis

| Metric | Value |
|--------|-------|
| Minimum occupancy to break even | 18 pods @ $500/month |
| Target occupancy | 38 pods (95% of max) |
| Break-even occupancy | 47% |

**Very sustainable.** Even at 60% occupancy, the project covers operating costs.

---

## Member Monthly Costs

| Pod Type | Monthly Fee | Includes |
|----------|-------------|----------|
| Solo | $450 | Rent + utilities + internet + commons access |
| Double | $550 | Same |
| Family | $700 | Same |
| Care | $600 | Same + priority support |

**Comparison to market**:
- Studio apartment in Bloomington: $900-1,200/month
- 1BR apartment in Brown County: $800-1,000/month
- **Honeycomb solo pod: $450/month (40-50% savings)**

---

## Expansion Financing (Hex 002)

When ready to expand (Year 3-5):

| Source | Amount |
|--------|--------|
| Operating surplus saved | $150,000 |
| New member shares (20 @ $11,000) | $220,000 |
| Construction loan | $600,000 |
| **Total available** | **$970,000** |

**Self-sustaining growth.** Each new hex can be financed primarily by new members joining.

---

## Risk Mitigation

| Risk | Mitigation |
|------|------------|
| Member turnover | Share is transferable; waitlist fills vacancies |
| Construction overruns | 10% contingency + fixed-price contractor |
| County rejection | Present strong case; have backup counties |
| Utility failure | Well + septic = off-grid capable; solar backup |
| Investor default | First lien on real assets; member buyout first right |

---

## Timeline to Funding

| Milestone | Timeline |
|-----------|----------|
| Core team formed (5 members committed) | Month 1-2 |
| Land optioned | Month 2-3 |
| Business plan + pro forma complete | Month 3-4 |
| First 20 member commitments | Month 4-6 |
| Investor presentations | Month 5-7 |
| Full funding secured | Month 8-10 |
| Construction loan closed | Month 10 |
| Ground breaking | Month 12 |

---

## Next Steps

1. **Form legal entity** (LCA or LLC)
2. **Recruit founding members** (need 5-10 to start)
3. **Option land** in Brown County
4. **Finalize designs** and get contractor estimates
5. **Pitch impact investors** with business plan
6. **Secure construction financing**
7. **Build**

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*This financing model is a living document. Update as real costs and commitments materialize.*