Creative Financing for Construction Loan on Build & Sell Investment Property

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Creative Financing for Construction Loan on Build & Sell Investment Property

Tamara AglaurePro Member
Member since 2020 · 4 posts · 3 votes

Hi All,

Before my husband and I pull the trigger on a hard money loan I wanted to know if anyone has other financing ideas for our construction project. We have HOA-approved plans and are ready to go with a great builder and we own the lot outright (worth $1.5M). We have a decent amount of equity ($1M+) in other investment properties but have maxed out our DTI on them so we cannot go the traditional route. To cover payments on the loan we are willing to sell one of our other investment properties but would prefer not to as the one we are considering nets $2K/month in rent.

Here are the details:

1. We own the lot worth $1.5M

2. The construction costs are $2.2M

3. Finished value of home: $6.5M

4. We have excellent credit and experience building and flipping homes

Hoping someone out there has a brilliant idea on how to finance this.

Thank you!

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Kerry BairdPro Member
Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
3y

Welcome to BP! Good question…glad you posted. How about DSCR on the equity on those other properties, since DTI isn't a factor?

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  • Kerry BairdPro Member
    Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
    3y

    Welcome to BP! Good question…glad you posted. How about DSCR on the equity on those other properties, since DTI isn't a factor?

    2Reply
  • Scott Henson
    Real Estate Agent · Metro-Detroit · Member since 2023 · 3 posts · 2 votes
    3y

    Have you considered trustworthy hard money or private loan as an option? I know the guy I use in MI will buy a property I own at 75% LTV and immediately sell it back to me in a land contract in order to pull equity out. Maybe an option...

    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Tamara Aglaure

    You could lend against this and the other properties so you did not have to sell it

    One of the brokers we work with just did 3 loans like this for people. Terms were high (14%+ 4points) but the people did it because selling other properties would cost them easily 6% in realtor fees and the rate compared to other construction loans was not too bad.

    They calculated on. $2M loan he did it saved them $100k overall and a $4M loan over $250k

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    1Reply
  • Tamara AglaurePro Member
    OP
    Member since 2020 · 4 posts · 3 votes
    3y

    Thank you for all of these fantastic suggestions. You have given me a lot to consider. Does anyone out there know an investor that would want to partner on the project?

    0Reply
  • Tyler Case
    Lender · Florida, USA · Member since 2023 · 33 posts · 5 votes
    3y

    Hi Tamara! Echoing what Chris said. Where is the property located? 

    0Reply
  • Tamara AglaurePro Member
    OP
    Member since 2020 · 4 posts · 3 votes
    3y

    Park City, Utah

    2Reply
  • Doug SmithPro Member
    Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
    3y

    If this is for you to live in or a 2nd home, then legally your options are going to be limited. If it's for investment, however, it's very do-able without looking at your personal DTI, but we would have to make the loan to an entity with you guys guarantying the loan. You would be looking at about 80% of the value of the lot (if you've owned it for a while) or the cost of the lot (if you just bought it) plus the build cost to a max of 70% of the Completed Value. You appear to qualify on all accounts based on your description. Your rates are going to be about 11%-12% with your points being about 3.5% - 4% with no prepayment penalty. The size of the loan your seeking might eliminate a lot of PMLs, but based on what you're describing, I think you'll have options.

    0Reply
  • Ruchit Patel
    Bay area, CA · Member since 2021 · 383 posts · 306 votes
    3y
    Quote from @Tamara Aglaure:

    Park City, Utah


     Tamara,

    I had a deal in Cape Coral, most lenders bailed out on it, but one finally came forward and took the opportunity. He would be perfect. Message me, and I will share his contact information. 

    0Reply
  • Logan M.
    Investor · Provo, UT · Member since 2016 · 759 posts · 626 votes
    3y

    @Tamara Aglaure I just secured a construction loan for a ten plex in Utah and we went with Central Bank. 

    We were also approved with UCCU and RanLife.

    I would suggest talking to CoFI, they are Utah-based or Ranlife.

    Truthfully, if those companies can't/won't lend to you I would not move forward. They are way more flexible than most and if they say no it makes me think that you may be taking on too much risk. Feel free to DM me if you have any questions, or if you want their direct contact information.


    0Reply
  • Tamara AglaurePro Member
    OP
    Member since 2020 · 4 posts · 3 votes
    2y

    Hello Logan,

    Thank you for your response. I would love to get their contact info. Still trying to figure out the best path. We are even considering partnering with someone on the project. Any thoughts on that idea?

    Thanks again!

    Tamara

    0Reply
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