Hard/Private Money for New Construction - Winston Salem, NC

3 Replies

Hey BP folks. I'm looking at buying a lot or two in a new development in Winston Salem, NC. The lots are ready to build and the agent says I can use my own builder or use the developers preferred builder. I can also hold the lot as long as I'd like. I have enough cash on hand to buy the lot but not to build the house. I don't want to use a bank loan if I can avoid it (although I do have an excellent credit score). My guess is that construction + holding for sale will be be 8-12 months. With an average construction cost of $65-80/sqft and recent comps, I'm looking at possibly a $25-30K profit.

Question 1: Do either Hard Money Lenders or "Private Lenders" lend for new construction?

Question 2: Do HML or PL loan for 12 months?

Question 3: What are other funding options for new construction?

Hi Melvin,

   Private lenders do lend on new construction. Since they are private, they create their own unique terms. Some will lend up to 70%, and others will lend even more. They will require money down or cross collateral property. If you haven't yet, do a web search for private lenders in your area and see what they say. Good luck.

Without me really crunching the numbers I would say that getting the deal 100% financed with only a $30k margin doesn't seem likely, but I'm not familiar with the Winston market. If the lot value gives you enough equity in the completed value of the home, it may be possible.

 Private lenders generally have higher rates and higher points, so make sure you have enough saved to get through the construction phase, it almost always costs more than you think!