How Would You Recommend Securing Funding to Purchase Land & Build a Small Apartment

[Lee Johnson]

I’m in the early planning phase of a real estate development project and would love your insight and guidance.

I’m looking to purchase land and build a small apartment complex consisting of 1 to 10 units, with a mix of layouts:

• 1-bedroom, 1-bath lofts with in-unit washer/dryer
• 2-bedroom, 1-bath apartments with in-unit washer/dryer
• 3-bedroom, 2-bath units with washer/dryer hookups

The vision is a modern, efficient design targeting working professionals and small families, ideally in a growing urban/suburban area with strong rental demand.

As a first-time developer, I’m trying to figure out the best path to secure funding for:

1. Land acquisition
2. Construction costs
3. Soft costs and contingencies

I’m open to various financing options, including hard money, private lenders, construction loans, JV partnerships, or even syndication if that makes sense at this scale.

So my main questions are:

• How would you recommend structuring financing for a project like this?
• Would lenders be more willing to work with me if I had a general contractor lined up?
• Are there programs or lenders that cater to small-scale multifamily new construction for first-timers?
• Any creative strategies you’ve seen work well in similar situations?

I appreciate any feedback, suggestions, or experiences you’re willing to share especially from those who’ve built from the ground up.

Thanks in advance!

—Lee J.

[Ryan Mancuso]

@Lee Johnson

I admire your ambition!

I have developed for the last few years and what I have found is that lenders care about securing the asset (the leverage in case you default). They care about the GC, but are mainly concerned with how you will pay for the project. What will rents be? How are you funding the construction? You would proabably need at least 25% if not more down to get the loan. Hard money lenders will care about those same things too. No one wants to re-po an asset and sell it, especially a bigger project like this where the buyer pool is limited. Having a GC is a good step, but you need to do your due dilience when selecting one. Not just the one who will build for the chepaest price (there is usually a reason).

• Once you get beyond 4 units, you are looking at commerical lending. The interest is higher and the money needed is more. I would consider building something where all of the units are the same size. That would make for an easier first project rather than having 9 units - 3 1 bed 3 2 bed and 3 3 bed. The plans cost more, and there is a higher margin for error.

You can possible give the GC or your partners some equity if you will sell or a combination of equity and profit from rent in exchange for a reduced contractors fee. This is where trust is so important.

Maybe start a bit smaller and then you can scale as you learn!