Build to Rent Financing

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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

6mo

You can do construction to permanent financing. My suggestion is to connect with a wonder and have discussion so they fully understand your product and business model and they should be able to customize a solution for you. We recently did this with someone in Texas, who was subdividing land and provided them financing to start on several homes and as homes got completed whether they sold them rented we're able to allow them to scale

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Devin PetersonBusiness Member

Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 664 votes

6mo

Quote from @Jeff Graybeal:

Hey Everyone, I am a GC/Real Estate Investor that has several years of experience doing complete rehabs, but would like to grow into the build to rent space. I have some questions about financing options in this area of investing.

Some context: Our company has the capital to buy the land, put 20-30% down, and even finance the build of one property at a time out of our own accounts, but we would like to scale faster than one property at a time. We are aware that we may need to build a property to prove the experience to do so.

Vision: We’d like to purchase the lot, finance the build of a home/multi-family property, and then do a cash out refi/dscr loan at the end.

Questions:

Do we need to plan to purchase our own land and then start the construction loan process?

Is there a process where you can do the construction & refi in one swing without multiple closings?

Do you have to wait a 6 month seasoning period to be able to access your equity

We've done DSCR loans for our rental homes before, but I am unsure how the construction loan process works. During construction do you pay interest only payments or do you pay towards the expected construction cost?

Thanks!!

HI jeff,

Great questions! Sounds like youre ready to take the leap into that next level! To answer your questions simply: NO, you do not need to buy the land outright, there are loans and lender options out there that will allow you finance the horizontal and soft cost items. However - a lot of lenders will ask that you do buy the land, go through all the horizontal soft cost items first and make it "shovel ready" in order for them to committ. You have options in both cases, more in the latter.

Construction to perm - yes, this exists.. just depends who you go with. However, I have seen a lot of cases where builders will close and construction to perm deal and when the transition period comes the market shifts, and there are better to terms on the table that from other lenders and your current debtor might not be willing to adjust. Just a thought. I get "saving on cost" in theory - but I have seen that scenario play out in reality more often than not where the refi ulitmately made more sense (paying the refi cost than taking a higher converted rate).

Confused on the quity access question? Elaborate?

During reno project loans you are only paying interest on the GUC/LTC plus the drawn amount. You have whats called dutch and non-dutch. You are seeking non-dutch. Which is also and option, depending on lender terms and leverage available, both could be in the mix

Happy to connect and chat more if you have questions - good luck!

[email protected]860-538-3672

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Rodney MenendezPro Member

Developer · South West Florida · Member since 2020 · 74 posts · 53 votes

6mo

From what we’re seeing in SWFL working with investor clients:

• Local banks & credit unions are the most flexible — especially if you're building multiple doors (duplexes or small portfolios). They'll often lend based on projected DSCR once stabilized.

• Debt funds / private lenders are faster for ground-up BTR, but you’ll see higher rates and lower LTC (usually 70-80%). Great for speed, then refi into perm debt.

• DSCR new-construction loans are becoming more common — some lenders will underwrite off the pro-forma rent instead of personal income once CO is issued.

• For first-time BTR builders, expect to bring 20-30% equity plus reserves.

On the construction side, the numbers have to make sense day one. Most of our investor clients are targeting:

• Duplex or SFR builds below market value
• Rent that supports DSCR refi after completion
• Equity capture at CO to recycle capital

Example in our market right now:
Duplex build ~$340K + ~$85K land → appraises ~$550K–$575K completed. That spread is what makes the BTR financing stack work.

Biggest advice: line up your exit refi lender before you break ground. It de-risks the entire project and helps your construction lender get comfortable.

Happy to share lender contacts if you’re building in Florida or similar BTR-friendly markets.

[email protected]239-288-0702

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John Clark

Member since 2018 · 1k+ posts · 1k+ votes

6mo

Quote from @Jeff Graybeal:

Hey Everyone, I am a GC/Real Estate Investor that has several years of experience doing complete rehabs, but would like to grow into the build to rent space. I have some questions about financing options in this area of investing.

Some context: Our company has the capital to buy the land, put 20-30% down, and even finance the build of one property at a time out of our own accounts, but we would like to scale faster than one property at a time. We are aware that we may need to build a property to prove the experience to do so.

Vision: We’d like to purchase the lot, finance the build of a home/multi-family property, and then do a cash out refi/dscr loan at the end.

Questions:

Do we need to plan to purchase our own land and then start the construction loan process?

Is there a process where you can do the construction & refi in one swing without multiple closings?

Do you have to wait a 6 month seasoning period to be able to access your equity

We've done DSCR loans for our rental homes before, but I am unsure how the construction loan process works. During construction do you pay interest only payments or do you pay towards the expected construction cost?

Thanks!!

Do you have relationships with ultimate buyers already?

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Simmy AhluwaliaPro Member

Lender · Atlanta, GA · Member since 2015 · 1k+ posts · 200 votes

6mo

@Jeff Graybeal - We do a good bit of SPEC financing, from individual homes to complete subdivisions; however, the ones we have financed have been on a Build to Sell model. BTR is fine too. You mentioned, multi-family, how many doors? But yes, depending upon the private lender, you can look for a construction to perm and/or refinance once you have CO.

Since you have capital, I would purchase the lot (after talking to planning/zoning), go through entitlements, secure permitting needed, then look for the development and vertical financing, although you can do this concurently.

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Javier RosalesPro Member

Los Angeles Ca · Member since 2019 · 107 posts · 15 votes

5mo

Good Morning BP Community. this is a good thread.

I am too wanting to build from the ground up. I just purchased a mix use. 80% residential 20% commercial. their is lot of space to build, all that is on C2 zoned lot. going over the zoning code I am allowed to build a SFR on it. here is the thing, the appraisal report came back saying its 4 units. When its a triplex that's the residential part, not the novelty store. I would half to see if the planning department of Bakersfield Ca would still let me build a extra unit, due to 4 units is considered SFR. the financing I was looking at if I am allowed to build was the FHA one-time close (OTC). I was wondering before striking land. I would like to start asking the planning department questions to get answers, now if the planning department sees me asking a lot would they flag me for further investigation

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Matthew BernalBusiness Member

Investor · Austin, TX · Member since 2021 · 497 posts · 126 votes

5mo

Great set of questions — you're thinking about this the right way. Let me run through each one from the lending side.

Land first or simultaneous? Most construction loan programs want the land owned free and clear or purchased as part of the closing. Some lenders will do a land + construction combined close, which means you're not carrying the lot separately before breaking ground — worth looking for if you want to simplify the capital stack.

One closing vs. two? Yes — construction-to-perm (also called a C-to-P) does exactly this. You close once, fund the build via draw schedule, then the loan converts to permanent financing at certificate of occupancy. No second closing, no requalification, no seasoning gap to bridge. This is almost certainly the right structure for what you're describing.

Seasoning on the cash-out refi? If you go construction-to-perm, the seasoning question largely goes away since you're converting at stabilization rather than doing a separate cash-out refi. If you do a standalone construction loan and then refi, most DSCR programs want 3–6 months seasoning — but some lenders will go off appraised value at CO with no seasoning if the DSCR qualifies, which is the faster path to pulling equity.

Interest during construction? You pay interest only on drawn funds as the lender releases each draw — not on the full loan amount. So if your total construction budget is $400K and you've drawn $150K, you're paying interest on $150K. Draws typically release on inspection milestones tied to your build schedule.

Given you're a GC with rehab experience and capital to put 20–30% down, you're going to be a strong candidate for most construction lending programs. The piece lenders will want to see is a spec build or ground-up in your portfolio — even one — to confirm build-to-rent experience specifically.

What market are you planning to build in, and are you looking at single-family or multifamily for the first ground-up?

[email protected]832-981-3190

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Ryan Arth

Developer · Cleveland / Akron, OH · Member since 2008 · 922 posts · 399 votes

3mo

We have been talking to a hard money company for our ground up, as the process is easier. It is interest only during the draw period, and a maximum 12 month time horizon. They will not loan for the land, we have to buy it ourselves.

In speaking to regional lenders, they want our equity portion of the total project cost to be spent before they step in. They do count the value of the land (if already owned) towards your equity. The rates are lower, but the paperwork and financial analysis of your balance sheet, etc, is much more stringent.

And yes, they also have land + GUC cost products, with permanent financing behind it upon completion.

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Cory KingBusiness Member

Real Estate Agent · Knoxville, TN · Member since 2021 · 164 posts · 77 votes

2mo

don't need to buy land first, there's lenders who will fund the land and build as 1 project. i know some local banks and private money connections and happy to make some intros. @Jeff Graybeal

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Ed O.

Investor · Statewide, MO · Member since 2011 · 813 posts · 424 votes

2mo

Talk to local banks.

You can get a better deal from a financing standpoint. You'll get slaughtered in dscr fees if you go the dscr route.

Some banks will lock your long term rate when you close your conduction loan. some will refuse to lock a perm rate until the build is done. This is a bad scenario and puts all the rate risk on you.

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Vijay FriedmanBusiness Member

Miami, FL · Member since 2026 · 766 posts · 122 votes

2mo

Quote from @Jeff Graybeal:

Hey Everyone, I am a GC/Real Estate Investor that has several years of experience doing complete rehabs, but would like to grow into the build to rent space. I have some questions about financing options in this area of investing.

Some context: Our company has the capital to buy the land, put 20-30% down, and even finance the build of one property at a time out of our own accounts, but we would like to scale faster than one property at a time. We are aware that we may need to build a property to prove the experience to do so.

Vision: We’d like to purchase the lot, finance the build of a home/multi-family property, and then do a cash out refi/dscr loan at the end.

Questions:

Do we need to plan to purchase our own land and then start the construction loan process?

Is there a process where you can do the construction & refi in one swing without multiple closings?

Do you have to wait a 6 month seasoning period to be able to access your equity

We've done DSCR loans for our rental homes before, but I am unsure how the construction loan process works. During construction do you pay interest only payments or do you pay towards the expected construction cost?

Thanks!!

@Jeff Graybeal
Sounds like you've already got a solid investment background. Many investor-focused lenders can structure a construction loan with a DSCR refinance as the planned exit, although the exact process, seasoning requirements, and whether land can be financed together vary by lender. Are you planning your first build-to-rent now, or do you already have a lot identified?

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