Finance

What Makes Construction Loans Different?

Real estate investors have a lot of choices when it comes to financing a product, but each one is built for a different kind of investment. When it comes to development and construction projects, there are a few choices. Which is right for your next deal? If you’re building from the ground up, it’s probably best to use construction loans.

Funding as You Build

While some investors use other methods of financing like bridge lending to improve or rebuild properties, often rehab and new construction projects are better suited to a construction loan program. That’s because these loans are based on the value of the completed construction, not just the acquisition cost of the property. As a result, you get a higher LTV that funds both the property cost and the improvements you intend to do.

Short-Term vs. Long-Term Options

Construction loan programs offer a range of options that use different methods of distribution, including some that use milestone lending. Short-term construction loans Miami FL give you the working capital you need in one shot, but they are seldom written for terms over a year. So which should you use?

Milestone-based programs tend to assume a lengthy development time, often in excess of a year. They are built to make sure projects stay on track, and frequently used to finance multi-lot developments like shopping districts. For simpler construction projects like hotel improvements or new retail space construction, it’s often easier to go with a short-term construction loan that only needs approval review once.

Find Construction Financing

Loans for construction are a long-established financial product available through most lenders who offer commercial mortgages and other real estate financing options for investors. Check out the same lenders you trust for traditional commercial loans and other real estate investment financing loans. You’ll find many of the same lenders you trust to finance flipping single-family homes have construction financing options for larger buildings as well.

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