Ground-Up Construction Financing
A practical guide to financing non-owner-occupied residential construction and development projects.
Ground-up construction financing adds construction risk to the real estate underwriting process. Lenders typically evaluate the land or acquisition basis, total development cost, plans, permits, construction budget, sponsor experience, liquidity, completed value, and exit strategy.
Construction financing should be treated separately from a standard renovation loan because the documentation, draw process, project readiness, and experience requirements can be materially different.
Common use cases
- Acquire land or a property for new construction
- Finance vertical construction of investment housing
- Complete a teardown/rebuild investment strategy
- Develop small multifamily or eligible residential investment projects
- Build for resale or an eligible refinance/rental exit
How lenders look at it
What typically drives the financing decision
Project economics
Land/acquisition basis, hard and soft costs, contingency, total cost, and expected completed value.
Project readiness
Plans, permits, entitlements, utilities, site conditions, contractor readiness, and realistic construction schedule.
Sponsor experience
Prior completed ground-up projects and the strength of the builder/GC team can materially affect leverage and eligibility.
Liquidity
Cash equity, reserves, contingency capacity, and ability to carry the project through delays or cost changes.
Exit
Sale, refinance, or rental stabilization strategy and the market assumptions supporting it.
Preparing your request
What to have ready
Requirements vary by program, but a complete and organized package helps FLS identify the right path and reduces unnecessary back-and-forth.
Project
Plans/specifications, permits/entitlement status, detailed construction budget, schedule, and project description.
Property
Purchase/land documents, title information, site details, and valuation/appraisal items.
Team and borrower
GC/builder information, experience schedule, entity/ownership documents, liquidity verification, and credit information.
Process
From request to funding
- 1
Confirm readiness
Confirm project readiness, total cost, and completed-value assumptions.
- 2
Review the sponsor
Review sponsor/GC experience, liquidity, credit, and requested leverage.
- 3
Match the program
Match the project to an appropriate construction lender/program.
- 4
Underwrite
Complete appraisal/feasibility, underwriting, legal, and closing requirements.
- 5
Fund by draw
Fund according to the approved draw process as construction progresses.
What can strengthen the request?
Experienced sponsorship, permitted shovel-ready projects, conservative budgets, meaningful contingency, strong liquidity, and a well-supported exit are important strengths.
Find the right ground-up construction financing path
FLS Capital Advisors works across multiple financing sources rather than forcing every request into one program. Answer a few questions about your business and financing objective, and a specialist will review the paths that may fit.
General information only. This guide is intended for educational purposes and does not constitute an approval, commitment to lend, or guarantee of financing. Programs, eligibility, rates, fees, terms, collateral requirements, and documentation requirements vary by funding source and may change. Final eligibility and terms are determined by the applicable funding source after review of a complete application.