Financing for new construction Muli family units - duplexes

[Josh Bogal]

Hello, I’m a new part time realtor, primarily holding my license for invest opportunities. My license is hung with a company that builds custom homes. I’ve been trying to get my foot in the door with Multi Units rental properties, hold and save long term investment. Initially i was searching for already built and established units but what I was finding is the area I live in just wasn’t producing any great options. I currently reside in Greenville, SC a city that on the rise at a very quick rate. I'm now looking to build new units, my Fiancée and I have around $100,000 DP and great Debt to income ratio, long term job, great credit history, collateral, etc. But what I’m finding is banks will not entertain new construction mult unit loans. I’ve applied with Wells Fargo and a local credit union that was recommended, both have came back with the same type of response. They are not interested in "speculative" properties.. I’ve tossed around the idea of trying hard money lending but know this will be very costly in monthly interest rates? I’m just looking for suggestions or any info that could get in going in the right direction.  . 

Also, I have found a great piece of peoperty that can accomidate 12 total duplexs. the builder i work for sounds intertested in building them and or throwing in the investment with me..  

[Account Closed]

Since you are looking to do long term rental, you might need to really assess the real cost of construction.  Building for sale product is very different financing criteria than for rental.  I realize that you work for a builder and you might be able to save some money but lenders look at market cost as a guide.

If you do for sale product, explore pre sale situations so that when you approach the lender you can show a viable exit. You could also look to do an investor turnkey type deal. Either way, your ltv will be much lower than existing.

With $100,000 you might be looking at $500,000 in existing property where as with new construction, you might be in the $300,000 range. Construction cost, land, carry, lease-up etc will mean that even a really cheap deal would be over $100,000 per unit. With $300,000 you would only be able to do three units. Existing property might yield you 10 good units which will be a lot easier to finance and provide a better return on your investment.  

Lastly, if you do have some land, you could phase in the building by building one duplex, leasing it and then refinancing and then doing another and so on. 

We currently are building 8 duplexes on a for sale basis and have pre-sold 3 units which made our financing a lot easier.