Ground-Up Construction Financing for Investors
How It Works
When housing inventory is low, building from the ground up can be a viable strategy for real estate developers. Ground-up construction loans provide capital to acquire land (or utilize land you already own) and fund the vertical building process.
Unlike a traditional mortgage where the full amount is typically funded at closing, construction loans commonly release funds in stages (draws) tied to project progress. Interest calculation, reserve requirements and draw procedures vary by lender and program.
Key Characteristics
Staged Funding
Construction financing commonly uses staged draws tied to project progress. Interest calculation and draw procedures vary by lender and program.
Interest Reserves
Some loans include an interest reserve built into the budget so out-of-pocket monthly payments may not be required during construction. Availability varies by lender and program.
Flexible Exit Strategies
Depending on the project, investors may sell completed homes to retail buyers or refinance into a DSCR portfolio loan to hold as rentals, subject to lender approval.
Typical Guidelines
Ground-up construction carries its own risk and reward profile. Partnering with a lender who understands draw management and construction timelines can help keep a project on track. Program guidelines vary by lender — comparing wholesale programs can help identify the right fit. See our Construction Loans page for more.
Submit Your Scenario
Get started by completing the form below and an associate will reach out to get your free quote.
"*" indicates required fields