Ground-up financing for residential and multifamily investment projects.
Construction loans play a crucial role for investors seeking to finance the development of residential or mixed-use properties from the ground up. These property development loans are often used for speculative builds, rental developments, or long-term investment projects. They can be structured for both construction and permanent financing, offering flexible solutions for a range of real estate ventures.
A new construction loan is a short-term or hybrid financing option that funds the cost of building a property, including land acquisition (if applicable) and construction expenses. Existing land that is already owned may also be refinanced into a construction loan to help offset closing costs. Unlike traditional purchase loans, new construction loans, like many fix and flip loans, are typically funded in stages as the project progresses. This is commonly referred to as a draw process.
New construction loans are typically disbursed through a series of draws based on completed construction milestones. Funds are released as work is completed and inspected, which helps manage risk and ensures the project stays on schedule. Depending on the loan structure, investors may make interest-only payments during construction, followed by a refinance or automatic conversion into permanent financing after completion.
Investors can utilize new construction loans to finance ground-up builds, which encompass land purchase, site preparation, and construction costs. These loans are particularly useful for those looking to invest in real estate developments.
After the construction is complete, investors may opt to refinance into long-term financing options such as DSCR loans. This approach helps stabilize payments, enhance cash flow, or prepare the property for rental or sale, making it a strategic choice for investors who plan to hold the property as a rental.
Financing for ground-up construction is available through various options. These loans feature a draw-based funding structure and often include interest-only payments during the construction phase, depending on the program. Short-term options are also available, along with flexible exit strategies such as selling, refinancing, or holding the property. This financing is specifically designed for investment properties, not primary residences.
New construction loans are commonly utilized by real estate investors building rental properties, developers constructing single-family or small multifamily projects, investors planning to refinance after stabilization, and borrowers seeking flexible underwriting for investment builds.
While requirements vary by program, lenders typically review:
| Feature | Typical range |
|---|---|
| Loan term | 9 to 24 months (commonly 9, 12, 18, or 24) |
| Interest rates | About 8.79% (extensive experience) to 13.99% (little or no experience); varies greatly with experience |
| Leverage | 65–90% loan-to-cost (LTC) |
| Maximum loan-to-ARV (LTARV) | 70–75% |
| Funding | Released in draws as construction milestones are completed and inspected |
| Payments during construction | Interest-only options, depending on the program |
| Loan structure | Often short-term to fund the build phase, then refinance or sell |
| Borrower experience | Verifiable experience improves leverage; most lenders count only projects where the borrower was on title |
| Closing time | 2–3 weeks for residential builds; 3–6 weeks for commercial developments |
| Property types | Single-family, multifamily, mixed-use, small and large residential developments, and commercial developments |
Terms are indicative of what may be offered and are not guaranteed. Actual leverage and terms depend heavily on the scenario’s ratios, the borrower’s verifiable experience, and each lender’s guidelines.
Here are a few recent new construction loans we closed for investors. Borrower names and property addresses are withheld for privacy.
Examples of past transactions only. These deals were refinances of land the borrower already owned, so leverage reflects how each lender calculates loan-to-cost (LTC) in that scenario. Terms vary by lender, property, and borrower, and past results do not guarantee future terms.
Some new construction loan programs allow financing for both land acquisition and construction, while others require the land to be owned separately. This depends on the specific loan structure and lender requirements.
Down payment requirements vary by lender and loan program. In most cases, investors are expected to contribute some capital toward the project in addition to loan proceeds. Typical leverage is 65–90% loan-to-cost (LTC) with 70–75% loan-to-ARV (LTARV). Actual leverage depends heavily on the scenario’s ratios and on verifiable borrower experience.
Most lenders prefer borrowers with prior construction or development experience, while others may allow first-time builders if the project is supported by a qualified builder or team. Nearly all lenders count only projects where the borrower was on title. Experience as only a general contractor typically does not count as qualified experience.
Many new construction loans are short-term and designed to fund the build phase only. After construction is complete, investors often refinance into permanent financing or sell the property as part of their exit strategy.
Yes. Many investors refinance completed construction projects into long-term financing once the property is stabilized or rented.
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