Private Construction Lending Evolution 2022

In this guide, we discuss the evolution of ground-up construction financing in the private lending industry from 2021 to 2022. This includes the build-to-rent phenomenon, the shift of investment strategy from fix & flip to ground-up, the reduction of interest rates, and the challenges of financing construction projects on a national scale.

While attending the IMN Single Family Rental Conference in December 2021, our CEO, Rocky Butani, interviewed Nathan Trunfio, Managing Director and Head of Sales at Lima One Capital, to get more insights about this topic.

The majority of real estate investors who specialize in rehab value-add deals for multifamily and residential investment properties have had a hard time finding deals since the beginning of the pandemic due to record-low inventory. Some of them have shifted their investment strategy from rehab to development projects, and ground-up construction has become a very popular loan program in the private lending industry.

Increased Competition for Land Acquisition

In addition to the rising costs of building materials and construction labor in twenty twenty-two, investors face another challenge which was the catalyst for the shift to ground-up development projects, and that is low inventory. Starting in early 2021, there has been a huge demand for buildable land in urban and suburban markets throughout the country. If an investor is having a hard time finding vacant land to acquire, they may need to seek improved properties that can be torn down, but those too are in high demand.

Maximum LTV for Land Purchase Financing

The majority of private lenders that offer ground-up construction financing will also fund the land acquisition. The typical LTV is fifty percent of the purchase price for unentitled vacant land, and up to sixty-five percent of the purchase price for entitled vacant land. So investors will need to have a cash down payment of thirty-five to fifty percent for the purchase.


How to Find Private Construction Lenders

If you’re looking for a private lender to fund a residential or multifamily ground-up construction project, use our website as a resource. There is no fee to search for lenders and make contact with them directly.

  1. Start at the Residential Construction Loan page
  2. Type in a state or major metro area, and click SEARCH
  3. Click REFINE RESULTS if you want to filter the list
  4. View each lender’s profile to learn about their guidelines, pricing, and much more
  5. Click the green CONTACT button and reach out to the lender directly

Please remind each company that you found them on PrivateLenderLink.com. 

We also have a great system to make your search for lenders more efficient. Click the ‘Create a Loan Request’ button to enter your deal information. Save it, then invite select lenders to view it, and they can message you directly through our platform. If you’d like some assistance with your lender search, you can click a button to request recommendations from us. We’ll view the deal and invite a few select lenders, some of which may not have a public profile on the site.

February 15, 2022