Understanding New Construction with Western Capital

Transcript (auto-generated)

Hello, I am Akinyi with Western Capital and today we will talk about new construction. A bit about us. Western Capital has over 54 years combined experience. We have rehabbed, sold, or held for rentals an average of eight properties per year in a span of 11 years. We have held residential builders and contractors licenses.

We’re real estate agents and brokers ourselves. Well, during our own journey building our real estate portfolio, we discovered that the customer service from loan officers in this non owner occupied investment lending space was so poor. So we decided to help others have a better experience when looking for these types of loans.

This compelled us to launch Western Capital in 2013, and currently we work in 42 states. So back to new construction. Let’s start with the overall requirements. The lot needs to be approved by the city allowing you to build. You will need city land designations, lot, zoning and entitlements complete.

Depending on your experience level, lenders can be flexible to allow some city plan and permits to be approved at least before the first draw after the closing. Your general contractor will have to show proof of liability insurance as well as workman’s comp if required by the state. You will also work with this contractor to create a detailed construction budget to get you to the desired end value on your appraisal.

This budget will also help facilitate the draw process in the stages that you laid out. Make sure that a boundary survey has been completed before closing. This ensures that no encroachments will affect your property. The loan has to close in an entity name, so you will need to set it up either as an LLC or a corporation, and line up your entity documentation such as articles, EIN letter per your state.

Lenders in this space will finance up to 85 percent of the total project cost, that’s lot value or purchase price plus the ground up cost. You will send us your bank statements reflecting 15 percent of the construction budget plus your down payment. Well, the expectation is that you complete this 1 to 4 units project under a year.

So the term is usually 12 to 24 months time frame. Well, like we say, every day that investment property or land sits without an activity is another day you lose money. Since no two borrowers are alike, call us today to discuss your scenario.