Spec home construction lending, at what point will banks loan
Currently I'm building spec homes on land that I buy with all cash using a construction loan that resembles a hard money loan with ~10% APR and points. My builds are fairly quick and have been completed in 2-3 months. I'm able to get projects done fast because most of the time I'm fronting my own cash at the front end to get permits, surveying ,design approval and sometimes even foundation completed along with several other deposits on windows, doors and cabinets. After I get the construction loan funded I immediately pay myself back (except for the land) and pay the rest of the construction expenses with the hard money funds. This means that I'm already several weeks into a project before I take on the loan, saving me interest but I'm taking on serious costs in points for a loan that only last 2 months. Additionally, once I have the loan pressure is on to take the first offer I'm given because of the daily interest costs on the loan, I've lost out on an extra $30k on one deal because I pulled the trigger 10 days too early on an offer.
I’ve tried to present bankers an offer to fund the loan but I haven’t found the right “combination” as Brandon Turner likes to call it. This gave me the idea to reach out to the BP community for advice on the following:
- 1.Is there a specific stage in the build that would catch the interest of a banker?, such as:
- a.Once plans are approved and permit is granted
- b.Once foundation inspection is passed
- c.Once framing inspection is passed
- 2.Are there specific banks that fund construction projects that I’m missing out on?
- a.Are there special appraisals needed?
- 3.Should I give up all hope on saving hard money costs and write it off as a cost of doing business until I put up all the construction costs myself?