New Construction Ground Up
Laredo Texas · Member since 2026 · 1 post · 3 votes
New Construction Ground Up
Most Popular Reply
Lender · Miami, FL · Member since 2026 · 38 posts · 14 votes
3w@Humberto Rangel , Welcome! I’ve financed ground-up construction deals in Texas, so here’s what I’d look at.
Funding options:
Banks: Often the best rates, but the process is slow and they usually want strong builder experience and a clean financial picture.
Hard money: Fast, but expensive. Works best for short timelines and experienced builders with a clear exit.
Syndication: Brings in multiple investors, but adds more paperwork, reporting, and coordination.
Private or construction lenders: A middle ground. Often more flexible on structure and faster than banks, with rates below hard money.
Underwriting basics:
LTC (loan-to-cost) on the total budget, usually capped around 80-90% depending on the lender and your experience and equity.
LTV on as-completed value, usually around 65-75%. Lenders care more about the exit value than the cost.
Budget: Include a contingency, typically 5-10%, and verify each line item with bids.
Interest reserve: Make sure the loan covers interest during the build and lease-up or sale period.
Draw schedule: Lenders will fund in stages after inspections, so know how the draws are structured.
Exit: Sale, refinance, or both. Plan for the exit before you pick the loan.
Closing costs: Budget for origination, title, legal, and inspection fees. Check the actual numbers with the lender rather than using a rule of thumb.
13 Replies
- 3wDevin PetersonBusiness MemberLender · Sarasota, FL · Member since 2022 · 2k+ posts · 695 votes
Welcome, Humberto. A few things that help on both the underwriting and the capital side:
Underwriting a build: lenders and investors mostly look at your all-in cost (land, hard costs, soft costs like permits and plans, interest carry, and a contingency of around 10%) against the as-completed value supported by recent new-build comps. Many ground-up construction lenders cap loans at roughly 70-75% of as-completed value and 80-90% of total cost, so plan on bringing 10-20% of the project cost in cash or land equity. Have a line-item budget, a realistic build timeline, and a clear exit (sell, or refinance into a long-term rental/DSCR loan) before you pitch anyone.
Raising capital: if you have completed builds to show, construction debt plus a smaller private-money or partner piece for the down payment is often cheaper than giving up a large equity split in the company. If you take money from passive investors, talk to a securities attorney first, since pooling investor money can fall under SEC rules.
The best thing you can put in front of either group is a couple of finished projects with actual costs versus sale prices or appraised values.
ProAlpha Capital55 Reviews - Lender · Miami, FL · Member since 2026 · 38 posts · 14 votes3w
@Humberto Rangel , Welcome! I’ve financed ground-up construction deals in Texas, so here’s what I’d look at.
Funding options:
Banks: Often the best rates, but the process is slow and they usually want strong builder experience and a clean financial picture.
Hard money: Fast, but expensive. Works best for short timelines and experienced builders with a clear exit.
Syndication: Brings in multiple investors, but adds more paperwork, reporting, and coordination.
Private or construction lenders: A middle ground. Often more flexible on structure and faster than banks, with rates below hard money.
Underwriting basics:
LTC (loan-to-cost) on the total budget, usually capped around 80-90% depending on the lender and your experience and equity.
LTV on as-completed value, usually around 65-75%. Lenders care more about the exit value than the cost.
Budget: Include a contingency, typically 5-10%, and verify each line item with bids.
Interest reserve: Make sure the loan covers interest during the build and lease-up or sale period.
Draw schedule: Lenders will fund in stages after inspections, so know how the draws are structured.
Exit: Sale, refinance, or both. Plan for the exit before you pick the loan.
Closing costs: Budget for origination, title, legal, and inspection fees. Check the actual numbers with the lender rather than using a rule of thumb.
- Realtor · Memphis, Shelby County · Member since 2026 · 395 posts · 135 votes3w
Humberto, from the agent side of new construction, the builders who stay profitable share a few habits: they track costs weekly against budget (not monthly — monthly is how overruns hide), they carry a real contingency of 10-15% because something always surprises, and they lock pricing with subs and suppliers early. Two more: builder's risk insurance from day one, and know your draw schedule cold if you're using construction financing — cash flow timing kills more small builders than the build itself. If you're building spec, build for the buyer pool, not your personal taste. Are you building spec or pre-sold?
- Lender · Houston, TX · Member since 2026 · 138 posts · 42 votes3w
Humberto, building homes efficiently in south Texas is a real advantage, and it's great that you're thinking about capital early. When you're starting out, construction lenders mostly want to see your total budget, the land or lot you're building on, your plans and permits, and any homes you've already completed, so gathering those in one place will open more doors. Photos and final costs from past builds help a lot, even if they were small projects. My team at EquityNest Capital works with builders on ground-up construction, and I'd be happy to look at your next build with you. Do you already own the lots, or are you buying them as part of the project?
- 3wErik EstradaBusiness MemberLender · Los Angeles, CA · Member since 2022 · 7k+ posts · 1k+ votes
Hey Humberto,
How are you currently building your existing homes? (Cash, Hard Money, JV-Funds?)
LuxePrivate Investments LLC 572 Reviews - Lender · Dallas, TX · Member since 2024 · 29 posts · 11 votes3w
Humberto, I’ll take the lending side of this one.
Ground-up lenders look at three things on a newer builder:
The land, owned or under contract and ready to build
A line by line budget and timeline from your GC
Experience. If you don’t have finished builds yet, bringing a builder who does onto your entity makes a huge difference on leverage and pricing
The best files get up to 85% of total cost, funded in draws as the work gets done. Expect less on your first couple.
On underwriting a build, start with what it sells or appraises for when it’s done and work backwards. Land plus build plus carry plus selling costs, and make sure there’s real margin left over.
I run a lender in Dallas, so weigh that. Texas is home for us.
- 3wMayo GilfurtPro MemberReal Estate Consultant · Connecticut Ct · Member since 2026 · 171 posts · 37 votes
Hi Humberto, you’re asking the right questions. Ground-up financing starts with properly underwriting each project before approaching lenders or investors.
For each home, I would organize the land basis, construction budget, permits and plans, completed value, expected sales price, construction timeline, borrower equity, experience, and exit strategy. Those numbers determine whether the project is better suited for a construction loan, private debt, equity capital, or a combination of sources.
Since you’re already building homes in South Texas, I’d be interested in learning more about your current projects and growth plans. Feel free to send me a direct message with a brief project summary, and I can review the capital request and discuss possible structures.
— Mayo Gilfurt
Gilfurt Capital
- Contractor · Pensacola, FL · Member since 2017 · 329 posts · 157 votes2w
Builder here.
Banks, Hard money, Private, HELOCS. I've done all but private. When I say private, I mean an individual with money that lends it to me.
Not to say I wouldn't. I'd love to have someone like that. But Im not great asking for it.
So I stick with the bank for construction and hml for cash out refinances. If I wanted to scale up using debt, I'd probably do so with the hml.
I get 90% LTC.
How I do it is put together a pro forma, send it to my banker or lender. In the pro forma, I'll have the lot, the proposed house with plans, comparable sales. Comparable rentals. (renting is sometimes my primary exit strategy, sometimes selling). Then the cost breakdown. I break it down by cost code. So site prep, foundation, framing, siding, MEP's, Finishing. I'll include the specifications that shows what's going in the house. They'll usually ask for a personal financial statement showing your financial situation.
They'll order an appraisal of the plans. Then title work. Then close and you're off.
Before I close, I have already paid for the land, the permits, any liens on the property, and maybe site work. This constitutes my 10%
I usually already have the foundation ready so I order a draw as soon as the ink is dry. That's typically 20%.
They'll have their own draw schedule typically but if not I'll give them one. Banks will for sure. Anyways. you want to budget for the interest you carry while you are waiting for the house to sell. In this market it might be 2-4 months after completion.
Here is tip though. Duplexes. They pencil really well for dscr cash out refinances. So the 10% of money you put in it you can recycle over and over again. Just know if you do that you are going to be paying for 2 sets of loan costs. The construction, and the refi.
You make alot of money in this game when you buy the land. If you overpay for the land, you are behind the curve from the jump.
Partners. don't. cheaper to borrow. Only time id partner is if im taking on a project that is out of my comfort zone or requires more capital than I can borrow.
- Investor · Seattle · Member since 2018 · 35 posts · 7 votes2w
If your build cost assumes your own labor or project management, I'd show a second budget that pays someone else to do that work. A lender or partner can then see whether the margin holds up if you run more than one build at a time.
- Lender · Fort Lauderdale, FL · Member since 2020 · 58 posts · 18 votes2w
Congrats on getting started @Humberto RangelIf your build costs are truly competitive, that's a great advantage, but I'd focus just as much on proving the numbers as on finding capital.
From a lender's perspective, capital tends to follow builders who can clearly answer a few questions:
What's the total project cost?
What's the expected completed value?
What are the comparable new construction sales?
What's the expected timeline?
How much cash are you contributing?
What's the exit strategy if the market softens or the build takes longer than expected?
For raising capital, I'd start by building a simple deal package. Include the lot, plans, budget, timeline, comps, and projected profit. It's much easier to attract lenders or investors when everything is organized and easy to review.
On underwriting, one mistake I see new builders make is focusing only on construction costs. Make sure you're accounting for:
Interest and carrying costs
Permits and impact fees
Utilities and site work
Realtor commissions
Closing costs
Contingency for overruns
I also like to underwrite every deal assuming it takes a few months longer than planned and sells for a little less than expected. If the deal still works, that's usually a good sign.
Building homes can be a great business, but conservative underwriting is what keeps builders in business long term. The investors and lenders I've seen gravitate toward are the ones who know their numbers cold and have a realistic plan, not just an optimistic one.
Best of luck. South Texas has a lot of growth, and if you can consistently build quality product and stay disciplined on your numbers, you'll have an easier time attracting capital over time.
- Technology · New York, NY · Member since 2026 · 71 posts · 19 votes1w
Humberto, kill the phrase "efficient build costs" before anyone wires a dollar. Nick is right. Rebuild the budget at market GC pricing plus a 6% builder fee and show the delta. That delta is your only real equity story, and a lender underwrites the second budget anyway.
Jeremy's 90% LTC is a repeat-builder number. As a first-two-build sponsor, model 80-85% LTC and 65-70% LTARV, whichever binds first. On $420k all-in against a $560k ARV, 70% LTARV caps you at $392k, so you carry $28k plus closing. Luis and Devin said it plainly: LTARV governs, not LTC.
Then carry. Draws follow an S-curve, not a straight line. Foundation 20%, dry-in 55%, finishes 100%. Average outstanding runs near 55% of the facility. At 11% on $392k across a 9-month build and 4 months to close, that is roughly $23k of interest, and each month of slippage adds about $3.6k. If the exit is a DSCR refi, a 1.25x floor at 7.5%/30-year supports about $229k per $2,000 of monthly NOI. Back into that before you buy dirt.
Juan has the survival math: underwrite a 12-month build and a 5% price cut. If it still clears 15% on cost, you have a business. If it only works on your timeline, you have a bet. If you subdivide, price horizontal work per pad, since water, sewer, and street cost is fixed per lot and does not scale with the house. Humberto, what is your all-in cost per foot and your verified ARV per foot from three closed new-build comps within two miles?
Join the conversationCreate a free account to reply, vote on answers and follow this thread.