NEW CONSTRUCTION FINANCING

28 Replies

Hope all is well.

I'm looking for new construction financing. The project is in Newark, NJ and I have a pre-approved end buyer lined up for the resell/loan payoff.

I already own the land, the lot is zoned for a 2 family, the soft costs will be around $7K, construction costs will be roughly $300K and the ARV will be $425K.

The builder is on board and my architect is working on the plans.

How would you finance the build?

Originally posted by @Kevin Tillery :

Hope all is well.

I'm looking for new construction financing. The project is in Newark, NJ and I have a pre-approved end buyer lined up for the resell/loan payoff.

I already own the land, the lot is zoned for a 2 family, the soft costs will be around $7K, construction costs will be roughly $300K and the ARV will be $425K.

The builder is on board and my architect is working on the plans.

How would you finance the build?

This would be a loan for a local commercial bank. You should shop several as they all have different appetites and offer different  rates and terms. 

@Kevin Tillery

Many of the big banks offer one time close construction loans with pretty reasonable rates and terms. Bank of America has one that a friend just used to build. Start talking to banks and check your local mortgage brokers too because that is becoming a more popular option for construction.

@Kevin Tillery You need a construction loan, which would be from a local bank that does investment construction loans, not all banks do it. Your going to need down payment/equity of 20-25% of total cost to get the loan. I really don't think the end buyer really comes into play.

If you dont have any experience with new construction, you will likely have a tough time getting approved unless you have super strong personal finances and personally guarantee the loan.

A better option might be to sell the project to the end buyer as is, pocket a small profit and pass the risk to the end buyer.

I wish you luck with financing your new construction. I have done quite a few with Lima One, but for the past 4 four months I have not found anyone lending for ground up. If you find someone please do share. Thanks

@Kevin Tillery

I don't think you need a construction loan.  If you already own the land, that would be paid out at the closing table along with about 15% of the construction costs for foundation and excavation.  Some of the one time close construction loans will go up to 90% of the subject to value.  We don't do them, but refer them out.

Sorry if this is late.  Just saw the post.

Stephanie

@Kevin Tillery

Thanks Kevin! However I think my old lender is back lending for new construction. I submitted everything last week, they pulled my credit today and asked for two statements, which is normal. I waited on them because they have the best rates I ever found and I have a relationship with them. So I should know by end of week, but as of now I think it's looking good. Good luck on yours, let's keep our fingers crossed.

Awesome discussion. Question; does it make a difference in obtaining a construction loan on wether the land is bought paid in advanced or can it be part of the loan and construction cost?