SFH New Build Development timeline

[Dave Meyers]

I am looking at building a house on a spare lot we own. Can you all confirm the process order and anything I am missing?

1. Decide on a floorplan 
2. Receive construction loan quotes
3. Receive soft appraisal
4. Sign Build Contract
5. Take out construction loan
6. Site Survey, Site Plan
7. Construction to occur
8. Certificate of occupancy
9. Final appraisal
10. Mortgage quotes
11. Close on cash out refinance
12. Rent out via Property Management

[Mike Wood]

@Dave Meyers I think you have some of the items out of order (at least they are for me).

1) Research and determine lot constraints (setbacks, house size, parking requirements, etc).  This might be your Architects problem.

2) Finalize house plans

3) Get builder/GC bids

4) Estimate soft and other cost not included in builder/GC bids

5) Select bank for construction loan

6) As part of the construction loan approval, they bank will require a pre-construction appraisal (the estimated value at completion based on plans) and plot plan.

7) Once the construction loan is finalized/approved, execute construction contract with builder/GC.

8) Apply and receive building permits (hopefully your work on step 1 make this process smooth)

9) Build house (This is a huge task, but since you did not break it down, I wont either).

10) Finalize construction, receive certificate of occupancy

11) Get final utilities installed/connected.

12) Market for rent

13) Select mortgage broker/bank for permanent financing

14) Apply for permanent financing, which will include the final appraisal

15) Close permanent financing.

16) Done.

You mentioned cash out refinance, but this may not be what you meant. You will obviously need to pay off the construction loan with the permanent financing. If you do a cash out for excess money over what the construction loan balance is, your LTV will be lower (typically 5%) than a straight refinance (which is how paying off the construction loan will be treated) and your rate will be higher (likely ~1% higher) assuming you use a typical 30 year residential mortgage.

I would not wait until all the permanent financing is done to rent it out, as you have stated.  That is likely 2+ months of lost revenue that the house is just sitting there doing nothing.