Lender · AL · Member since 2026 · 10 posts · 4 votes
I'm interested in learning from investors who have completed ground-up construction projects.
When financing a new build, what did you find most challenging: securing the initial loan, meeting the lender's experience requirements, managing construction draws, or keeping the project within budget?
For those who have completed multiple projects:
What financing option worked best for your situation?
How much cash reserves did you keep available for unexpected expenses?
What advice would you give someone preparing for their first ground-up construction project?
I'd love to hear about your experiences, lessons learned, and strategies for keeping construction projects financially sustainable.
Asking people who've actually finished a build is the right way to learn this, because the hard part rarely shows up on a term sheet. Putting ground-up budgets and draw schedules in front of the lenders I shop, the draws are where I see projects strain most. Construction draws are commonly paid after the completed work is inspected, so the builder fronts each stage. A few lenders take 5 to 7 days per draw and want notarized lien waivers every time. Subs who wait that long start taking other jobs, and a slipped schedule turns into extra carrying cost. A budget is only as safe as the cash that covers the space between finishing a stage and getting paid for it. Are you weighing a first build yourself or gathering this for borrowers?
Hey Susan, I've done a few new builds, so here's what's worked for me.
For financing I usually go with a hard money lender or a local credit union. Hard money moves fast and cares more about the deal and your builder. The credit union is cheaper but wants more of your own cash in and more paperwork. If this is your first build, having a licensed GC with a solid track record makes either one a lot easier to get, and if you own the lot free and clear, that usually counts toward your down payment.
On reserves, I'd keep 10 to 15% of the build cost as a cushion, plus enough to cover the loan payments for the whole build and a few extra months, plus enough to pay for one full stage of work yourself. Draws only get released after the inspection, so you end up carrying the builder in between.
Before you close, get the lender's draw schedule in writing and set up your GC contract on the same stages, so nobody is waiting on money that isn't coming yet.
The costs that bit me hardest were outside the house, like site work, utility hookups, permits and town fees ( had to build a road and that was a pain in the neck to do with approvals etc) . Those surprise people way more than lumber does.