Hi Virginian BP'ers!
My two partners and I are newbie investors in the Virginia Beach area and are trying to get started on our first deal. Through mutual friends we know a builder that has a set group of 6 or 7 floor plans he and his team build regularly, and so they know exactly what it costs and how long it takes for each one. We're really interesting in buying a cheap property to demo and spec build on the lot.
Our realtor is pushing/advocating hard money lenders, but I was wondering if anyone has had experience getting a construction loan from a bank around here? If so, did they include purchase price of prior existing home? Just the land? LTC and interest rates? Any information would be helpful. Thanks so much!
I have done a good number of deals down in your area. I think without a solid track record your going to find it difficult to secure bank financing for the type of deals you want to do. Furthermore, banks are terribly slow to close and release draws. I have talked to several clients lately who told me their bank financed deals are taking 30 days just to get a construction draw. At that rate you might as well finance the construction yourself.
I think your realtor is correct. You need to secure quick short term financing through hard money, private money or bring on an equity partner.
The new build finance structures I have see are as follows. 50-65% of the land value at closing depending on location and specs. Borrower must get through demo, foundation, and have something that resembles a structure in place. Once the borrower is first in with say 20-30% of the LTC the lender comes in and back-fills the remaining construction for the duration of the project. I am sure there are many programs out there but that is a typical structure up here.
I just spoke to Lou Gunter and Linwood Nelms of C&F Mortgage on Independence Pkwy in Chesapeake, and apparently they do a good business in lot and construction loans. Kevin West of Towne Bank also seemed to have great programs available for construction loans. I've also heard George Mason does them, but when I reached out on two occasions, they didn't return my calls. I haven't sold the lot yet (working through title issue), so cannot give you my experience working with any of them, but just researching for decent financing once resolved, and that's what I've narrowed it down to so far. Hope it helps.
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@Andrew Michael thanks for your input. Yeah, I know it's definitely not easy getting these loans being un-established.
@Lynn M. Thank you so much! That's some awesome info. I'm definitely going to go talk to them and see if they can help me out. You'll have to let me know how it works out for you.
I’m local to the Hampton Roads area and have been in the business for about eight years. We have done multiple new constructions multiple fix & flips as well as holding a rental portfolio.
I would highly suggest NOT Doing your first deal as a new construction as there are a lot of variables that play into that space of which is a lot of information to take on the learning curve your first go around. I would recommend a town home or small rehab south of 30k to get the feet wet.
I am privately funded and would be interested in possibly working with you on your first deal, feel free to reach out if you have any questions.
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