Ground up construction loans
Vertical construction financing for infill single-family, townhome, build to rent and small multifamily on Texas lots. Up to 85% of total cost, land financed or contributed, and interest charged only on the funds you have actually drawn.
Who this is for
Builders and developers putting vertical product on the ground: infill single-family in established neighbourhoods, townhome rows, small multifamily, and build to rent communities. Deals from a single spec house to a fifteen-unit project.
Cost, not price
Construction lending is underwritten to total project cost, not purchase price. Total cost is land plus hard costs plus soft costs, permits, plans, engineering, insurance, and a contingency that should be 5 to 10% of hard costs on anything but the simplest build. At 85% loan to cost, you are bringing 15% of that full number, which is why a contributed, appreciated lot does so much work for a sponsor’s equity position.
The second test is completed value. Total proceeds cannot exceed roughly 70% of what the finished product appraises for. In a market where construction costs have run ahead of sale prices, the value test is frequently the binding constraint, and finding that out at term sheet rather than at framing is the point of underwriting.
What we need from you
- Stamped plans and permits, issued or demonstrably ready to issue
- A line item budget by trade, with a schedule and a contingency
- Signed construction contract and the GC’s licence, insurance and portfolio
- Land: purchase contract, or the deed and any existing debt
- Your completed builds: addresses, sizes, dates, sale prices
- Liquidity for equity, carry and overruns, and there are always overruns
The exit matters more here than anywhere
A construction loan matures. It does not care whether the drywall is up. Before we fund, we want to know how you get out: sale at a price the comps support, a DSCR refinance at rents the market supports, or agency debt at a unit count that qualifies. Then we stress that exit for delays and softer pricing. Projects run long. Well-structured ones survive it.
Construction, specifically
Do I need to own the land already?
No. Land can be financed as part of the loan, typically at the lesser of your cost or appraised value, or contributed as equity if you already own it. Owning the land free and clear is the single most effective way to raise your effective leverage on a construction deal, contributed land equity counts toward your cost basis.
How much experience do you require?
Two or more completed ground up projects in the last 36 months gets you to maximum leverage. One completed project, or a strong rehab track record transitioning into building, gets reduced leverage. A true first time builder can still get financed, but we want a licensed general contractor with a real portfolio under contract, a fixed-price build agreement, and more sponsor equity in the deal.
What about permits and plans?
We want permits in hand or demonstrably ready to issue, stamped plans, a signed construction contract and a line item budget with a schedule. We do not fund entitlement risk or lend against a concept. If you are still in entitlement, a land bridge may carry you to the point where construction financing becomes available.
How is interest charged on a construction loan?
On the outstanding drawn balance, not the full commitment. If the loan is $1.2MM and you have drawn $400,000, you pay interest on $400,000. An interest reserve can be built into the loan so carry is funded out of proceeds rather than out of your pocket: useful, but it consumes proceeds, so it is a trade-off we will walk through on the term sheet.
What does the draw schedule look like?
Draws follow completed phases: foundation, framing, mechanical rough in, drywall and finishes, then a final draw at certificate of occupancy. Each draw is inspected before funding. Lien waivers from subcontractors are collected as you go, which protects your title and your closing.
Can you finance build to rent?
Yes, and it is one of our favourite structures. Build the units, lease them up, then roll the whole thing into a portfolio DSCR loan or agency debt depending on unit count. Underwriting the exit at the start, rents, expenses, achievable debt service coverage, is what makes that transition uneventful.
Every deal gets a real answer
Tell us the property, the plan and the number you need. A credit officer reads it and tells you what it will support.
- Texas hard money. A term sheet from the people who fund the loan.
- Commercial, all 50 states. Quotes from the desks that cover your asset.
- Outside the box? A straight reason, and usually a name that does fund it.