Build from grown up section in to a refinance

Los Angeles Ca · Member since 2019 · 107 posts · 15 votes

HI BP Community

I have an idea for a Zoned Parcel of C2. This parcel has a triplex and a small detached novelty shop. all fully occupied. their is still a lot of empty space to build a ADU, Duplex. but of course still need to get a CUP and planning approved from the city planning department.

is it or is their a construction loan to acquire to fund the build of a ADU, Duplex than refinance the exciting loan to and new loan to pay off the construction loan?

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Frank PyleBusiness Member

Specialist · USA · Member since 2024 · 279 posts · 130 votes

8mo

You are not stuck waiting five years unless you choose a loan with a hard prepay, so line up the loan to match your exit before you close in Bakersfield. If the CUP is the big swing factor, call planning this week and get a written read on feasibility and timeline because that drives whether you need a light bridge with no penalty or true construction draws. Quick numbers check is simple, take current monthly rent minus taxes insurance and realistic expenses and see if it still covers the new debt at a higher rate, because you might be carrying this longer than you think while permits move. If the as is DSCR is thin, a five year prepay can turn a good value add into a trap even if the build pencils.

What is the purchase price, current gross rents, and the loan terms you are being offered including rate interest only and the exact prepay language? How much extra cash do you have set aside to cover a six to twelve month CUP delay if rents dip or vacancies hit?

[email protected]317-501-3467

Frank Pyle at ExP Realty

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Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votes
8mo
Quote from @Javier Rosales:

HI BP Community
I have an idea for a Zoned Parcel of C2. This parcel has a triplex and a small detached novelty shop. all fully occupied. their is still a lot of empty space to build a ADU, Duplex. but of course still need to get a CUP and planning approved from the city planning department.
is it or is their a construction loan to acquire to fund the build of a ADU, Duplex than refinance the exciting loan to and new loan to pay off the construction loan?

Hey Javier,
Will this property be subdivided into two separate parcels? This might be more of a commercial construction loan you are looking for.
[email protected]818-269-7983
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- Javier RosalesPro Member
  OP
  Los Angeles Ca · Member since 2019 · 107 posts · 15 votes
  8mo
  Quote from @Erik Estrada:
  
  Quote from @Javier Rosales:
  
  HI BP Community
  I have an idea for a Zoned Parcel of C2. This parcel has a triplex and a small detached novelty shop. all fully occupied. their is still a lot of empty space to build a ADU, Duplex. but of course still need to get a CUP and planning approved from the city planning department.
  is it or is their a construction loan to acquire to fund the build of a ADU, Duplex than refinance the exciting loan to and new loan to pay off the construction loan?
  
  Hey Javier,
  Will this property be subdivided into two separate parcels? This might be more of a commercial construction loan you are looking for.
  
  No, it will remain all on one Parcel
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Frank PyleBusiness Member
Specialist · USA · Member since 2024 · 279 posts · 130 votes
8mo
Yes, you are basically describing a value add bridge or construction loan that rolls into a takeout refinance once the new units are built and stabilized. On a C2 parcel with existing occupied income, the lender will care a lot about the as is DSCR on the current triplex plus shop, your plan and budget for the ADU or duplex, and whether the entitlement risk is real since the CUP and planning approval can drag.

The actionable step today is to get a lender package together with current rents and expenses, a pro forma rent for the new units, a rough build budget, and your best guess timeline for permits and construction because that determines if you need an entitlement loan first or a true construction draw. Quick numbers check is whether the current NOI supports the debt service on the acquisition loan while you wait on approvals, and then whether the stabilized NOI hits DSCR after the build.

What is the purchase price, current gross rents, and your estimated all in build cost for the ADU or duplex, and do you already have any feedback from planning on the CUP timeline?
[email protected]317-501-3467
Frank Pyle at ExP Realty
Website View Page
NEXA Lending- Investors Edge Concierge
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- Javier RosalesPro Member
  OP
  Los Angeles Ca · Member since 2019 · 107 posts · 15 votes
  8mo
  Quote from @Frank Pyle:
  
  Yes, you are basically describing a value add bridge or construction loan that rolls into a takeout refinance once the new units are built and stabilized. On a C2 parcel with existing occupied income, the lender will care a lot about the as is DSCR on the current triplex plus shop, your plan and budget for the ADU or duplex, and whether the entitlement risk is real since the CUP and planning approval can drag.
  
  The actionable step today is to get a lender package together with current rents and expenses, a pro forma rent for the new units, a rough build budget, and your best guess timeline for permits and construction because that determines if you need an entitlement loan first or a true construction draw. Quick numbers check is whether the current NOI supports the debt service on the acquisition loan while you wait on approvals, and then whether the stabilized NOI hits DSCR after the build.
  
  What is the purchase price, current gross rents, and your estimated all in build cost for the ADU or duplex, and do you already have any feedback from planning on the CUP timeline?
  
  I have not yet started the process on getting the CUP, nor have contacted the planning department of Bakersfield, CA. but from what I have researching its possible and from you the loan process is grantable. when I close on this deal. I would still half to wait to pass the 5 year prepayment penalty. and its a commercial loan am getting. for this deal
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Frank PyleBusiness Member
Specialist · USA · Member since 2024 · 279 posts · 130 votes
8mo
You are not stuck waiting five years unless you choose a loan with a hard prepay, so line up the loan to match your exit before you close in Bakersfield. If the CUP is the big swing factor, call planning this week and get a written read on feasibility and timeline because that drives whether you need a light bridge with no penalty or true construction draws. Quick numbers check is simple, take current monthly rent minus taxes insurance and realistic expenses and see if it still covers the new debt at a higher rate, because you might be carrying this longer than you think while permits move. If the as is DSCR is thin, a five year prepay can turn a good value add into a trap even if the build pencils.

What is the purchase price, current gross rents, and the loan terms you are being offered including rate interest only and the exact prepay language? How much extra cash do you have set aside to cover a six to twelve month CUP delay if rents dip or vacancies hit?
[email protected]317-501-3467
Frank Pyle at ExP Realty
Website View Page
NEXA Lending- Investors Edge Concierge
View Page
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Bo SmithPro Member
Hinton, WV · Member since 2026 · 1k+ posts · 373 votes
8mo
C2 with existing residential is tricky - most cities require conditional use permits for mixed residential/commercial. Before you close, pull the site plan and check setbacks, parking ratios (C2 usually requires more spaces per unit), and fire access for additional structures. Also verify if the triplex is grandfathered non-conforming or actually permitted residential in C2. Have you confirmed what the city classifies that triplex as?
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Javier RosalesPro Member
OP
Los Angeles Ca · Member since 2019 · 107 posts · 15 votes
7mo
@Bo Smith @Frank Pyle @Erik Estrada

Hey Guys Good Morning.
I'm getting closer to closing, just finishing up the loan docs. the lender was being a stiffler about the insurance. I asked would it be ok to have the insurance in ACV VS Replacement Cost, to have the annual premium low. Lender responded with. we need the insurance to cover the loan, which it did, actually double the loan amount. than they ask they want to up date it to broad or special from basic. this raise's the primum am fighting to keep low. so I ask them and tell them. I know you guys want to be covered, but is it really necessary for Broad or special? its also got to be economical for me too. from that question they kept on basic. fighting to keep it a deal! right lol
this is a idea my agent came with, witch i think economical.

Instead of getting a construction loan and doing a refi. after getting a CUP I can do an owner built and pull permits one faze at a time. and fund when need to. what do you guys think?
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- Erik EstradaBusiness Member
  Lender · Member since 2022 · 6k+ posts · 1k+ votes
  7mo
  Quote from @Javier Rosales:
  
  @Bo Smith @Frank Pyle @Erik Estrada
  
  Hey Guys Good Morning.
  I'm getting closer to closing, just finishing up the loan docs. the lender was being a stiffler about the insurance. I asked would it be ok to have the insurance in ACV VS Replacement Cost, to have the annual premium low. Lender responded with. we need the insurance to cover the loan, which it did, actually double the loan amount. than they ask they want to up date it to broad or special from basic. this raise's the primum am fighting to keep low. so I ask them and tell them. I know you guys want to be covered, but is it really necessary for Broad or special? its also got to be economical for me too. from that question they kept on basic. fighting to keep it a deal! right lol
  this is a idea my agent came with, witch i think economical.
  
  Instead of getting a construction loan and doing a refi. after getting a CUP I can do an owner built and pull permits one faze at a time. and fund when need to. what do you guys think?
  
  Who's the lender on this?
  Unfortunately, if your lender is not willing to accommodate, It may make more sense to close an alternative way. This honestly should have been addressed before even arriving to closing, but take it as a learning experience to work with a verified and well-versed lender.
  ALOT of lenders sell their notes to secondary investors. They do not keep them and service them. If it was a bank loan, then this might be a different story as they are more likely to bend some rules. This is why it helps to work with someone that understands both. Not worth trying to save a few percentages over a sub-par lender.
  [email protected]818-269-7983
  LuxePrivate Investments LLC 572 Reviews
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Matthew BernalBusiness Member
Investor · Austin, TX · Member since 2021 · 497 posts · 127 votes
7mo
Interesting. A few quick questions:

Do you own the property free and clear, or is there an existing loan?
Is your plan to rent the new units and refinance, or sell after completion?

There are ways to structure this with construction or bridge financing and then refinance once stabilized — but the details above will determine what’s realistic.

Happy to weigh in once you share a bit more. Would love to connect!
[email protected]832-981-3190
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Javier RosalesPro Member
OP
Los Angeles Ca · Member since 2019 · 107 posts · 15 votes
7mo
@Matthew Bernal
Good Morning
their is an existing loan.
I plan to rent it out, and keep it.
how would I bridge loan this?
1 Reply
- Matthew BernalBusiness Member
  Investor · Austin, TX · Member since 2021 · 497 posts · 127 votes
  7mo
  Quote from @Javier Rosales:
  
  @Matthew Bernal
  Good Morning
  their is an existing loan.
  I plan to rent it out, and keep it.
  how would I bridge loan this?
  
  Hey, Lets have a quick call.
  [email protected]832-981-3190
  0 Reply
- Mayo GilfurtPro Member
  Real Estate Consultant · Connecticut Ct · Member since 2026 · 130 posts · 30 votes
  7mo
  Quote from @Matthew Bernal:
  
  Quote from @Javier Rosales:
  
  @Matthew Bernal
  Good Morning
  their is an existing loan.
  I plan to rent it out, and keep it.
  how would I bridge loan this?
  
  Hey, Lets have a quick call.
  
  Hey Javier happy to help here.
  If you'd like, you can send over the current loan balance, estimated value, and target rent, and I can tell you pretty quickly whether a bridge + DSCR exit makes sense.
  0 Reply
Mayo GilfurtPro Member
Real Estate Consultant · Connecticut Ct · Member since 2026 · 130 posts · 30 votes
7mo
This is typically structured as two phases, not one loan.
Phase 1 is a construction or construction-to-perm loan to fund the ADU/duplex build, usually with draws and based on plans, budget, and approvals (CUP, permits, etc.). Most lenders won't advance until entitlements are in place.
Phase 2 is the refinance, which is evaluated once construction is complete and the new units are leased. At that point, lenders will underwrite based on in-place income, not projected rents.
The key risk to manage upfront is timing — approvals, construction, and lease-up all need to align so the refi proceeds smoothly.
Do you already have preliminary approval from planning, or are you still pre-entitlement
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