Ground Up Construction for Duplex

Member since 2024 · 11 posts · 5 votes

Hello all,

I am still trying to get my foot in the door in REI and I have been looking at fix and flips it in my area those are slim and the numbers are tight only because I have limited funds and was looking at doing JV's.

My main question is I have seen a number of multi-family units but they are pretty run down and for the price it's almost the same or better to build new. With that being said has anyone ever used Owner Financing to purchase land?

Does this type of purchase allow construction? Or does the land need to be completely paid off before you can begin construction.

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Evan Alterman

Lender · Member since 2022 · 14 posts · 8 votes

There are options for no-experience ground up construction loan products. Usually just have lower leverage caps and some higher costs compared to having completed project experience. Some products require the land to be free + clear, others don't and will just cover less of the construction budget. Definitely depends on each scenario!

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Robert Rixer
Investor · Miami, FL · Member since 2015 · 355 posts · 268 votes
1y
Assuming you're looking to finance construction (otherwise you would use the cash to take down the land), owner financing wouldn't work. The owner wouldn't want their loan to be junior to the construction loan and vice versa.
More common with these types of deals is the owner would "contribute" the land as equity in the deal and you would share profits. You trying to have 100% of the deal while financing land and construction is possible but not realistic or advisable.
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- Jose Laffitte
  OP
  Member since 2024 · 11 posts · 5 votes
  1y
  Quote from @Robert Rixer:
  
  Assuming you're looking to finance construction (otherwise you would use the cash to take down the land), owner financing wouldn't work. The owner wouldn't want their loan to be junior to the construction loan and vice versa.
  More common with these types of deals is the owner would "contribute" the land as equity in the deal and you would share profits. You trying to have 100% of the deal while financing land and construction is possible but not realistic or advisable.
  
  Understood i don't mind a JV option I'm just trying to figure out the best option to get started.
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Account Closed
Developer · Boston · Member since 2018 · 4 posts · 2 votes
1y
If you have limited experience in real estate, trying to undertake development and construction is going to add a lot of other risk factors that you may be unable to navigate with the limited resources available to you. If you want to get experience building, you could start by identifying property that could be developed, ensuring the owner is willing to sell, assessing the feasibility, and presenting the deal to a builder who could start to teach you if the deal makes sense. The more deals you can show the better. The builder will probably be able to tell you in those pitch meetings why or why not those deals make sense, which is a lot easier way to learn.
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- Jose Laffitte
  OP
  Member since 2024 · 11 posts · 5 votes
  1y
  Quote from @Account Closed:
  
  If you have limited experience in real estate, trying to undertake development and construction is going to add a lot of other risk factors that you may be unable to navigate with the limited resources available to you. If you want to get experience building, you could start by identifying property that could be developed, ensuring the owner is willing to sell, assessing the feasibility, and presenting the deal to a builder who could start to teach you if the deal makes sense. The more deals you can show the better. The builder will probably be able to tell you in those pitch meetings why or why not those deals make sense, which is a lot easier way to learn.
  
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- Jose Laffitte
  OP
  Member since 2024 · 11 posts · 5 votes
  1y
  Quote from @Account Closed:
  
  If you have limited experience in real estate, trying to undertake development and construction is going to add a lot of other risk factors that you may be unable to navigate with the limited resources available to you. If you want to get experience building, you could start by identifying property that could be developed, ensuring the owner is willing to sell, assessing the feasibility, and presenting the deal to a builder who could start to teach you if the deal makes sense. The more deals you can show the better. The builder will probably be able to tell you in those pitch meetings why or why not those deals make sense, which is a lot easier way to learn.
  Thanks for the input.
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Evan Alterman
Lender · Member since 2022 · 14 posts · 8 votes
1y
There are options for no-experience ground up construction loan products. Usually just have lower leverage caps and some higher costs compared to having completed project experience. Some products require the land to be free + clear, others don't and will just cover less of the construction budget. Definitely depends on each scenario!
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Robert Watson
Member since 2025 · 4 posts · 1 vote
1y
Regarding your inquiry about using owner financing to purchase land for construction, it is not guaranteed that such an arrangement will permit immediate construction.
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Melvin ListBusiness Member
Lender · Tampa, FL · Member since 2016 · 1k+ posts · 381 votes
1y
@Jose Laffitte can you qualify for a Conventional One Time Construction loan?
C2 Financial
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