New home construction

1 Reply

My brother (general contractor) and I are working toward buying land and building new homes to then sell. I've done a few fix and flips to where I used a HELOC and hard money to purchase those properties and sell them for a profit to where I can now purchase the land. My brother has the knowledge and skill to build the new home, but I'm curious as to the best way to get the money for the construction of the new build. I've looked at a few banks that do construction loans, but they will only do that type of loan if the property was for a primary or second home (this would be an investment). I don't think hard money lenders will do "construction loans", and the few private money options I know of have their money tied up right now. Any suggestions or advice from any individuals who have done new home construction before?

Morning John. Sounds like what your referring to is a "spec home " or speculation which most lenders in our area will run from because of the rawness of the correction. Not sure of your market but I suspect it is similar in nature. I am a custom builder in our market and here is how I am able to build spec homes with no issues:

1.) I own the dirt - similar to your situation unless I'm misunderstanding

2.) No GC fees / overhead n profit or Realtor commissions included in my financing

Between these 2 items I have 70-75% equity all day every day which is acceptable to most lenders. Not sure why you are having issues but here is a suggestion. Talk to a community bank or a credit union. if your using a similar strategy per 1/2 above why not rent the units then sell 1/2/3 years later for capital gain which can be quite a bit lower than ordinary income tax.

Best wishes on your new endeavor

Chris