NEW CONSTRUCTION FINANCING

[Kevin Tillery]

Hope all is well.

I'm looking for new construction financing. The project is in Newark, NJ and I have a pre-approved end buyer lined up for the resell/loan payoff.

I already own the land, the lot is zoned for a 2 family, the soft costs will be around $7K, construction costs will be roughly $300K and the ARV will be $425K.

The builder is on board and my architect is working on the plans.

How would you finance the build?

[Mike Wood]

@Kevin Tillery You need a construction loan, which would be from a local bank that does investment construction loans, not all banks do it. Your going to need down payment/equity of 20-25% of total cost to get the loan. I really don't think the end buyer really comes into play.

If you dont have any experience with new construction, you will likely have a tough time getting approved unless you have super strong personal finances and personally guarantee the loan.

A better option might be to sell the project to the end buyer as is, pocket a small profit and pass the risk to the end buyer.