New Construction Financing On Land You Already Own

[Samantha Miller]

Hey BP,

I recently purchased a small vacant lot in Philadelphia. I am now considering building a triplex (3 unit) on the lot, so I would need a loan for the construction costs. For any lenders or experienced builders out there, what are your thoughts on how I would finance the project? How will potential lenders look at the deal, considering I already own the lot? Will the terms of my loan be any different then if I was coming to them to ask for a purchase + construction loan? Would I be able to put less money down on the construction loan? I would assume I am still putting up the lot as collateral. My goal would be to rent out the units and refinance, but the other exit strategy would be to sell.

If it helps, here are the estimated numbers:

• Lot: $30k (already closed)
• Construction Costs: approx. $350,000
• Zoning, Architectural Plans, etc.: approx. $10k
• ARV: $525,000

Thanks!

[Nat C.]

It sounds like a great plan. The ARV is solid. Have you calculated the numbers for what expected rental income will be? At least with a new build, the maintenance costs should be close to nothing.

Consider partnering with another investor if you can't get financing?

My company charges $2 per square foot for architectural plans which are stamped by a state licensed engineer and ready for submission to the building department. So we can do the architectural plans for a lot less than what you've forecast.