100% Financing Program for Ground-Up Construction Projects

Get an overview of Rehab Financial Group’s 100% Financing Program for ground-up construction projects in 30+ states. Lender Link’s CEO, Rocky Butani visited the company’s office in January 2023 to interview the company’s President, John Santilli. Watch the video or read the transcript below.

Interview Summary: Ground-Up Construction Loans

Overview:

John Santilli discusses his company’s ground-up construction loan program, outlining its structure, requirements, and target audience. The company primarily serves small to medium-sized builders and investors looking to finance construction projects. The discussion covers loan-to-cost ratios, liquidity requirements, experience qualifications, geographic considerations, and loan terms.

Key Highlights of the Loan Program

1. Loan Structure & Funding

• The company offers ground-up construction loans but focuses on small to mid-sized builders rather than large-scale developers.
• They fund 70% of the land purchase and up to 70% of the as-completed value, while covering 100% of construction costs.
• There are no loan-to-cost (LTC) caps on construction.

2. Land Purchase Participation

• They prefer borrowers who already own the land, particularly for small developments (3-5 units).
• However, they will finance 70% of the land purchase price, requiring 30% cash down from the borrower.
• Projects that are “shovel-ready” (i.e., have necessary permits in place) are preferred.

3. Cash Reserves & Liquidity Requirements

• Borrowers must have six months of reserves (equivalent to loan payments).
• Liquidity requirements are 15% of the total construction budget (previously 10%).
• A 10% contingency reserve is required in all construction budgets to cover unexpected expenses.

4. Experience Requirements

• Borrowers must have at least one completed ground-up construction project in the last 12 months.
• If the borrower has no direct experience, they must hire an experienced general contractor, who will be vetted.
• Experience outside of the last 12 months (up to 3 years) is still considered but may affect loan terms.

5. Loan Term & Geography

• Standard loan term: 12 months, but extensions up to 18 months are available.
• Loans are available in multiple states, but they are cautious in markets with declining property values.
• In areas with falling prices, a second appraisal may be required.

6. Loan Limits & Multi-Property Developments

• Loans are not restricted to single-home builds; multi-home developments are allowed.
• The total loan amount per borrower is capped at $3,000,000, whether for a single property or multiple properties combined.

7. Land Development vs. Single Property Builds

• They will finance both land purchase and land preparation for single-home construction.
• They do not specialize in raw land development (e.g., large-scale subdivisions requiring horizontal infrastructure).
• Case-by-case evaluations are done for projects involving both horizontal and vertical development.

Key Takeaways

• The ideal borrower is a small-to-medium builder with prior experience, owning land or with a shovel-ready project.
• 100% construction funding is available, but borrowers must contribute 30% toward land purchase and meet liquidity requirements.
• Experienced builders or vetted general contractors are required for approval.
• The loan cap is $3M per borrower, and the loan term is 12-18 months.
• The company is cautious in declining markets and may require a second appraisal in some areas.