For seasoned residential real estate investors, you probably have experience handling a wide range of new-build initiatives, whether its single-family houses or multi-family developments. However, successfully transitioning from blueprints to fully completed residences entails meticulous planning, considerable time, and—perhaps most importantly—reliable financing.
The good news is that there is a plethora of loan products for you to access the capital you need to complete your next construction project. One great option is using a new construction loan. The lending experts at Coastal Capital Funding have been assisting successful real estate investors for years obtain the financial resources they need to achieve their goals and have leveraged that experience to provide you with the following overview of the major benefits of new construction loans and how you go about obtaining this specifically structured funding.
Construction Loan Basics
To assist you in starting your next construction project off on the right foot, you can opt for a new construction loan to pay for project expenses prior to transitioning to a more long-term form of funding like a conventional mortgage. New construction loans are intended to provide a streamlined capital solution for developers planning to build new homes from the ground up. While it is somewhat similar to your standard mortgage, a new construction loan is distinct due to its efficient underwriting timeline, compressed duration and periodic disbursal schedule at clearly distinguishable project milestones as opposed to one lump sum disbursement.
These short-term funding plans usually only extend for approximately one year instead of continuing for the multiple years conventional mortgages typically do. Based on the particular construction plan, the new construction loan can be used to cover the acquisition of the land, obtaining any necessary licenses, paying fees, or acquiring materials, workers and contractors. Because new construction projects are often on a strict deadline, investors should be prepared to provide their chosen lender with a detailed overview of their proposed development during the underwriting process—including key metrics such as overall operating budget, anticipated timeline and architectural schematics.
Advantages of a New Construction Loan
- Accessibility & Speed: Private lenders like Coastal Capital Funding offer a streamlined underwriting process, allowing them to evaluate, approve and disburse funds in a fraction of the time it takes conventional banks to do so. And because hard money lenders have greater flexibility when it comes to the individuals they lend to, they are able to work with investors who may not have a stellar credit score or verifiable income but still have a viable construction project with tons of potential upside.
- Cost-Effective Funding Alternative: Although conventional financing options and personal loans may carry reduced interest rates, those loan installment plans usually last for multiple decades—meaning you end up paying a ridiculous amount in the form of interest over the lifetime of the loan. Compare that with a new construction loan, where the entire balance will be completely paid off in around a year, with most plans requiring you to only pay interest on funds drawn to date until the project is done. When you crunch those numbers, it is readily apparent that new construction loans can save you a ton thanks to their relatively short duration.
Private Real Estate Lending Made Easy
Coastal Capital Funding is a Direct Private Lender, funding a variety of real estate projects throughout Virginia, North Carolina and Nationwide.CCF offers quick, efficient common-sense funding solutions when traditional lending institutions fall short in terms of speed, underwriting and out of the box thinking.The CCF team brings thirty years of experience in the real estate industry. Our market knowledge and experience has us uniquely positioned to be your private lender of choice. We understand the needs and wants of our clients and we are hands-on with you every step of the way. We approach each deal as if it were our own- by identifying capital requirements and providing the correct funding solution. Get in touch with us today to learn more about how we can assist you in achieving all of your investment goals.