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Colin L.
Pro Member
  • Architect
  • San Diego, CA
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Reserves for a bank loan

Colin L.
Pro Member
  • Architect
  • San Diego, CA
Posted May 10 2019, 11:53

I have some questions about getting a construction loan from a bank for ground up development. Typically a bank will want the investor/developer to have a certain amount of money as "reserves" that is in addition to the down payment. Are these reserves placed in an escrow account during construction? Or does the investor simply need to show that they have reserves somewhere in their accounts? If so, do the reserves need to be in cash or can it be in another asset such as stocks, IRA, or real estate? For the investor providing the reserve, should they expect a return on that money? Thanks in advance for any help!

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