Ground-Up Construction Loans for Investors
A ground-up construction loan finances new construction of investment property, typically covering part of the land and most of the hard and soft costs, released in draws as the build progresses.
It fits experienced investors and builders developing spec homes, build-to-rent properties, and small multifamily projects.
Ground-Up Construction quick facts
These are the typical terms for ground-up construction. Your actual terms depend on underwriting.
| Typical amount | $150,000 to $10,000,000 |
|---|---|
| Typical term | 12 to 24 months, interest-only |
| Typical funding speed | Typically 3 to 6 weeks after a complete file |
| Typical minimum requirements | Up to 80% to 90% of cost, capped at 65% to 75% of ARV, building experience, approved plans |
| Cost structure | Interest on drawn funds plus origination points and draw fees |
Ground-Up Construction: good fit or not?
This option works well for some situations and is a poor match for others.
Good fit
- Builders and investors with completed construction projects
- Spec homes and build-to-rent communities
- Lots with permits or permits in process
- Projects with a licensed general contractor
Not a good fit
- Owner-occupied custom homes
- Projects without plans, budget, or permits
- First-time builders without an experienced partner or GC (limited)
Documents usually needed
Having these ready typically speeds up review. A funder may request additional items.
- Plans, specifications, and permits (or permit status)
- Detailed construction budget and timeline
- Builder resume and past project history
- General contractor license and insurance
- Land purchase contract or deed
- Bank statements showing liquidity
Ground-Up Construction: how it works
The process typically follows 4 steps from first conversation to funding.
Share the project
Send plans, budget, land details, and experience.
Size the loan
We present terms based on cost and projected value.
Close
Close on land and set up the construction holdback.
Build and draw
Funds are released in draws after inspections at each stage.
Ground-Up Construction vs. Fix and Flip Loan
The main difference comes down to structure, cost, and timing. Here is how they typically compare.
| Feature | Ground-Up Construction | Fix and Flip Loan |
|---|---|---|
| Project type | New build from the ground up | Renovation of an existing property |
| Typical term | 12 to 24 months | 6 to 18 months |
| Experience required | Higher | Moderate |
| Permits and plans | Required | Required only for permitted work |
Typical characteristics. Terms vary by funder and file.
Ground-Up Construction FAQs
Does a construction loan cover the land?
Many construction loans finance part of the land purchase or give credit for land equity you already own. The rest of the loan funds construction in draws.
What is loan to cost?
Loan to cost compares the loan amount to the total project cost, including land, hard costs, and soft costs.
Do I pay interest on the full loan amount?
Many construction loans charge interest only on funds drawn, though some charge on the full commitment. Confirm this before closing.
How much experience do I need?
Most funders want to see completed ground-up projects. Newer builders may qualify by partnering with an experienced GC or developer.
Can I refinance into a rental loan after completion?
Yes. Build-to-rent investors often refinance into a DSCR or multifamily loan once the property is complete and leased.