how to get financing for a spec home in Charlotte, NC

14 Replies

Trying to work a deal with 2 partners as a JV. We have a builder, and want to see if financing a construction load as a JV is even possible. I was already told by 1 lender that no one in the area with lend any money to builders, or investors. Thoughts?

There are some possibilities also for JV, did you check hard money lenders here in Charlotte?

@Adam Nessen I will tell you that if you're going to be in this business, and building "spec" houses, you're going to hear a lot of lenders tell you no, or it can't be done, or nobody is doing those loans. You have to have perseverance to be in this business, and not quit IF you have the people with the experience to build the project, and a good project. 

The question always is, what are you bringing to the table, and what are you asking them to provide? Does it makes sense? 

What you are looking for is a construction loan that would be personally guaranteed by all three of you, is that correct? What is the value of the project upon completion? What will the total costs be? What are you putting into the deal? What is your experience? 

All lenders make decisions based on the ability of the borrower to complete the project and pay them back. 

What I'm doing to fund my spec build is getting a commercial loan from a local bank. First Bank, Locust, NC. Luckily my partner is on the Board for the bank and has the financial history to support the build. We are partners in the LLC we formed and they are putting both of us on the note to guarantee the loan. I would recommend that if between the 3 of you, you have the financials to support the debt service.

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still trying to find some lenders for this.  We have had 3 or 4 say they will do it, but soon after we get into serious conversations, they flake out.  


We scratched the JV idea, and we are just buying the lot outright. We are still looking for financing for this. We have 2 banks that want 30% down based on actual cost, and not appraised value. Looking for something better than this. The bank in Locust is a possibility. We are having a little trouble getting them to respond to us though. Anyone else have a bank in NC they recommend?

I have had a good experience with Old Dominion Bank.
You will want to own the land free and clear.
If you don't have enough cash for that, then I suggest getting another partner with cash.

Bob, do you know who you spoke with through ODB?  We talked to them, but they didn't like the property.  It is partially in the flood zone.  Not a problem for where we are placing the house on the property.  It's a 230k .4 acre lot in Myers Park.  The bank has no idea what we have.  It appraised for 320k yet the banks are only going by actual cost to build.  Not giving us any credit for the equity that will be in the lot. 

Most Fannie lenders , and I suppose portfolio lenders too, use the cost of the land and not fair value (per fannie underwriting guidelines) to determine LTV. In other words, equity in the lot will not help you meet down payment requirements. Helpful to know, if you own the land for >1 year, Fannie guidelines use fair value. I have rentals that I will use for spec builds down the road which will provide for cash on cash returns that are theoretically infinite, since no cash is required to close --the lot equity helps meet LTV down payment requirements.

@Adam Nessen All of my construction loans have been based on cost, not appraised value. My loans have been thru community banks. I have been getting 80% LTC financing. When I turn the construction loan into a permanent loan, its done at 75% LTV, which is where I can pull put any equity generated in the project. My builds are for long term rental holds.

I would be doubtful many banks would loan based on appraised value on a new construction project.  Just too many unknowns that they can not protect themselves from.

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@Adam Nessen, 1st Financial Bank USA offers this type of financing in North Carolina.  Let me know if you would like any more information.


Korey Kraayenbrink

Can I ask a question here about N. C. since you mentioned the land was partially in flood zone. From what I understand, even if just a small part of the land is in a flood zone then one must carry flood insurance no matter where you put the house on the property, is that true, it was told to me by a realtor? I know FRIS has completed new flood zones for NC, VA, and Alabama already and one can find the new maps on their site. I also believe the changes go into effect next year and will cause a lot of mortgage holders to now be in a flood zone and they will be obligated by the banks to pay that high flood insurance to FEMA. I also understand FRIS (from NC) has been asked to redo Florida's flood zoning also which will cause a lot more properties to be declared flood zones. Anyone have any ideas about this as I will be looking for properties in Fl. and possibly NC. Thank you for any replies.

Are you interested in selling the lot?  Both New Dominion (not sure who Old Dominion is) and First Bank are great if you decide to keep it though.

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