General Contractor looking to finance new construction

[Spencer Wayne Whitley Jr.]

Just a brief rundown on my situation. I currently own a commercial general contacting company. We have built a few custom homes, however new construction residential isn’t our primary source of revenue. We have been in business almost 10 yrs. 

I also have an investment company that has been established for 10 yrs that I’ve flipped a few properties and hold land in.

**** My current issue with the lender that I recently spoke with was that I had to have experience building a SFR on my own property and have sold or refinanced and held in order to be approved for the loan. ****

little about the deal that I’m putting together 

I have a piece of land that that is permit ready plans approved ready to build on held it my property with no lien. Held in my property entity that I purposely keep a low balance and doesn’t show a lot of income. And I’d like to build the single family home and refinance with a dscr loan.

would anyone have any advice on this or suggestions 

[Tim Delaney]

I’d talk to some other lenders. The fact that you have built custom homes together with your general construction experience should be enough. My partner (a GC) and I built two spec homes over the past year. We had no experience building a house from scratch but I did have a bank willing to lend to us. We ultimately went with a private lender because it was easier.

[Doug Smith]

I know exactly what is happening with the push-back you're getting. Basically, the money used in this type of financing comes from "Wall Street". I remember when Lending Home, now Kiavi started, there really wasn't anyone other than banks and private individuals that would finance a new build...and those were hard to find. The people that run these companies usually come from an "investment banking", real estate, or construction background. Many don't come from traditional lending sources. The institutional firms that do this type of lending (we deal with them every day) have to "securitize" the loans...meaning have their hedge fund/Wall Street backer bless the deal. These people often don't understand lending and have a checklist of boxes to check. Having an experienced GC build their first deal or two of their own is, for reasons that sometimes don't make sense, get push-back. We do them, but like you we often get push-back from the capital-provider funds. It's stupid, but we have to navigate it. I'm glad you shared this.

[Patrick Roberts]

Reach out to Vincent Demarco at I Fund Cities. They specialize in funding spec build/new construction. He's in Charleston but lends throughout the Carolinas. DM me if you want me to put you in touch with him

[Jonathan Klemm]

Hey @Spencer Wayne Whitley Jr. - I was in a VERY similar situation here in Chicago, but I had less experience working on my own than you.

I had a piece of land that I owned free and clear, but since I didn't have any development experience, most of the banks wouldn't talk to me.  My advice is to keep trying because all it took was to find the right smaller bank willing to take a chance on me.  Using a smaller bank or credit union is the way to go.

Being that you have been in business for 10 years I am VERY surprised your business banker can't help you!

The other option is to find a partner with some experience and use that on the loan.

[Spencer Wayne Whitley Jr.]

Quote from @Doug Smith:

I know exactly what is happening with the push-back you're getting. Basically, the money used in this type of financing comes from "Wall Street". I remember when Lending Home, now Kiavi started, there really wasn't anyone other than banks and private individuals that would finance a new build...and those were hard to find. The people that run these companies usually come from an "investment banking", real estate, or construction background. Many don't come from traditional lending sources. The institutional firms that do this type of lending (we deal with them every day) have to "securitize" the loans...meaning have their hedge fund/Wall Street backer bless the deal. These people often don't understand lending and have a checklist of boxes to check. Having an experienced GC build their first deal or two of their own is, for reasons that sometimes don't make sense, get push-back. We do them, but like you we often get push-back from the capital-provider funds. It's stupid, but we have to navigate it. I'm glad you shared this.

 This is Spot on, It was actually Kavi that I was referring to. I was referred by a rather large investor friend of mine to them. We helped him with a Couple ground up New construction Rentals and He Can use The two property's as new construction experience but not us, this is what had me perplexed. 

[Spencer Wayne Whitley Jr.]

Quote from @Patrick Roberts:

Reach out to Vincent Demarco at I Fund Cities. They specialize in funding spec build/new construction. He's in Charleston but lends throughout the Carolinas. DM me if you want me to put you in touch with him

 Thanks for the referral i will reach out to them to see what they offer. 

[Spencer Wayne Whitley Jr.]

Quote from @Tim Delaney:

I’d talk to some other lenders. The fact that you have built custom homes together with your general construction experience should be enough. My partner (a GC) and I built two spec homes over the past year. We had no experience building a house from scratch but I did have a bank willing to lend to us. We ultimately went with a private lender because it was easier.

I have the option to lend through my current bank, and wanted to use private just because of the hoops and red tape that goes along with using my Business banker. 

[Spencer Wayne Whitley Jr.]

Quote from @Jonathan Klemm:

Hey @Spencer Wayne Whitley Jr. - I was in a VERY similar situation here in Chicago, but I had less experience working on my own than you.

I had a piece of land that I owned free and clear, but since I didn't have any development experience, most of the banks wouldn't talk to me.  My advice is to keep trying because all it took was to find the right smaller bank willing to take a chance on me.  Using a smaller bank or credit union is the way to go.

Being that you have been in business for 10 years I am VERY surprised your business banker can't help you!

The other option is to find a partner with some experience and use that on the loan.

 Our business banker Is more than happy to lend, however there's more red tape to jump through that i was attempting to avoid by going with a private equity lender. 

[Doug Smith]

Quote from @Spencer Wayne Whitley Jr.:

Quote from @Doug Smith:

I know exactly what is happening with the push-back you're getting. Basically, the money used in this type of financing comes from "Wall Street". I remember when Lending Home, now Kiavi started, there really wasn't anyone other than banks and private individuals that would finance a new build...and those were hard to find. The people that run these companies usually come from an "investment banking", real estate, or construction background. Many don't come from traditional lending sources. The institutional firms that do this type of lending (we deal with them every day) have to "securitize" the loans...meaning have their hedge fund/Wall Street backer bless the deal. These people often don't understand lending and have a checklist of boxes to check. Having an experienced GC build their first deal or two of their own is, for reasons that sometimes don't make sense, get push-back. We do them, but like you we often get push-back from the capital-provider funds. It's stupid, but we have to navigate it. I'm glad you shared this.

 This is Spot on, It was actually Kavi that I was referring to. I was referred by a rather large investor friend of mine to them. We helped him with a Couple ground up New construction Rentals and He Can use The two property's as new construction experience but not us, this is what had me perplexed. 

 Kiavi does a good job with a lot of things, but they tend to be a bit more "vanilla" and stick to their guidelines/checklists. We've not brokered anything through them in a very long time...not to say we wouldn't, but we formed closer capital partner relationships over time. By your description of the situation, I thought that might be in. 

[Jesse Holsapple]

I sent you a message, we've worked on similar scenarios previously.

[Caitlin Davis]

It's all about how we structure and present the experience you do have. I'm great at putting experience packages together for underwriting, and I know exactly what they look for when there's no direct construction experience verifiable by title. I also used to work at I Fund Cities! They're cool, but let me know if you have a hard time reaching them or want another option to consider. 

[Jonathan Klemm]

So @Caitlin Davis, are you saying you help investors put together decks to share with lenders?  or what details can you share about how you package everything together...that would be great information for the community!

@Spencer Wayne Whitley Jr. - What exactly is the red tape you are trying to avoid?  Any lender, private or conventional, will have some hoops, maybe just not as many for private lenders...

[Caitlin Davis]

@Jonathan Klemm I originate private loans, so I also handle the financing aspect. I'm not the underwriter who approves the loan, I just know what they need which is usually a thorough overview and proof of recently completed projects, where you were the GC.