Investing in real estate in the Sunshine State? A construction loan for an investment property can be your financial game-changer. This specific loan type can help you build your investment from the ground up, facilitating a route to lucrative returns in Florida’s booming real estate market.
Additionally, a construction loan gives you the liberty to create your property exactly as you envision it. Whether it’s a short-term vacation rental near the beach or a spec home in an up-and-coming neighborhood, this tailored financial tool provides the freedom and funds to shape your investment future.
Dive into the nuts and bolts of an investment property construction loan, a unique financial tool designed to fuel your real estate ambitions from foundation to finish.
An investment construction loan is flexible, allowing you to be your own general contractor or hire a professional third-party builder. This means you can either manage the building process hands-on, or employ experienced construction expertise, making it a versatile solution for your investment needs.
Investment construction loans cover nearly all types of non-owner-occupied properties—from land and single-family residences to spec homes, 2-4 unit properties, townhomes, and low-rise condos. Even for larger scale investments like small to midsize apartment buildings and mixed-use properties, these loans provide the financial foundation you need to kickstart your construction.
Construction loans are usually short-term, typically 12 to 18 months. For all our new construction investment loan programs, your level of experience will determine your interest rate, loan-to-value, and loan-to-cost (LTC). Even without prior ground-up experience, you are still eligible for a construction loan, although the terms may not be as favorable as for those with more experience.
We are not a traditional bank. As a mortgage broker in Miami with a network of creative, non-QM lenders, we have access to a wide variety of new construction loans for investors.
Whether you’re a first-time builder or a seasoned investor, we have a construction loan program for you:
If this is your first time building a home from the ground up, it can be tough to find financing. Fortunately, we have construction lenders who specialize in lending to first-time builders.
If you build multiple projects in a year, a typical plain-vanilla bank mortgage won’t do the job. For those juggling multiple projects simultaneously, we provide specialized loan programs, like a builders’ line of credit, tailored to meet your expansive needs.
The construction process is lengthy with many phases: land acquisition, permitting, vertical construction, and exit (selling or refinancing). One loan may not be enough to get you from start to finish. If you get stalled, a bridge loan can help fill the gap and move you to the next phase.
We are expert problem-solvers when it comes to new construction loans. We’ve helped clients obtain construction loans for a rental property as well as for a spec home to flip.
Our client, who had no prior ground-up construction experience, needed a construction loan for a rental property. First, we secured him a 1-year bridge loan to acquire a valuable plot of land in Miami. Building upon this foundation, we then refinanced the bridge loan into a 1-year construction loan, with an impressive 80% LTC. When the house is completed and occupied by tenants, we will help him refinance into a longer-term loan, solidifying his accomplishment in the real estate market.
Our client was a general contractor himself, and he was looking to build his very first spec home in Stuart, Florida. We obtained his first construction loan and he sold the finished product above the appraised value. For his second build, he qualified for a lower interest rate due to having experience under his belt.
Our client faced a hurdle as a new general contractor lacking experience, struggling to secure a construction loan for building a single-family home on recently purchased vacant land in Florida. However, we successfully obtained a construction loan for him, featuring favorable terms such as 90% LTC, flexible draw schedule, interest only charged on draws, a 9-month loan term, extension options, and minimal cash required to close. He sold the property above appraised value and we look forward to assisting him with future spec home projects.
Questions about construction loans for investment property? Let us guide you to the next step and kickstart your journey.
Generally, a 20% down payment is required for investment property loans, but loan programs and circumstances can offer alternative options based on creditworthiness, the property’s cash flow, and property type, so consulting with a lending professional is crucial to determine the specific requirements for your investment property.
To avoid a 20% down payment on an investment property, you can explore alternative financing options such as specialized loan programs, portfolio loans, or partnerships. Additionally, improving your creditworthiness and negotiating favorable terms can help reduce the required down payment. Consulting with a lending professional is key for personalized guidance.
For construction projects, a short-term construction loan is typically the best option. This type of loan is specifically designed to provide funds during the building process, with features like flexible draw schedules and interest-only payments, ensuring the financing aligns with the construction timeline and budget.
The 2% rule in real estate investing suggests that for an investment property to be profitable, the monthly rental income should be at least 2% of the property’s purchase price. This rule serves as a rough guideline to assess the potential cash flow and return on investment for a property.
