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Colorado New Construction Loans
No matter how great a property once was, sometimes there is no saving it. An unsound foundation, rotten roof, and wrecked electric may mean the house just cannot be saved. However, if the lot is great, it could still be a good investment. But how do you get a hard money loan for a property you’re planning to tear down? The best answer is probably going to be a new construction loan — yes, even though there may be a structure on the property already. It all depends on what you want to do with the lot and any structures already existing.
Hard money loans for new construction are not just for financing brand new builds. They can also be used for tearing down or gutting a property and doing a major overhaul. And, of course, they can also be used to finance a new project, including both the land and construction costs.
Short-Term and Long-Term Options
Opting for a new construction hard money loan is a bit different from most other hard money loan options. To begin with, most hard money loans rely on the property itself to secure the loan. If you are tearing down the property or starting with an empty lot, that complicates things. A new construction loan, on the other hand, takes that into account during the underwriting process.
New construction loans take into account both the purchase of the land itself as well as the expenses that come along with the construction or renovation. Generally, new construction loans will pay out to cover the cost of the land upfront, and the rest of the loan amount will go into an escrow account. From there, it will be up to the lender to disburse funds as needed based on the construction plans. At TABS, LLC we want to work with you to create a hard money loan based on your planned project.
Since new construction hard money loans are a bit different from other options, the application process will be a bit different too. Since the structure won’t generally be used to secure the loan, it is generally helpful to be able to show your experience with previous successful projects. As with any loan, it is a wise idea to meet with a lender beforehand to know the qualifications needed to meet. Common concerns specific to new construction hard money loans include:
- Location — lenders will want to see that the area you intend to invest in is one that will likely provide a good return on the investment.
- Process — do you know how often you will need to draw from loan funds to pay contractors or subcontractors? Determine what the process is for both contractors and for the lender.
- Lot — a new construction loan will factor in the cost of the lot, but it may or may not include the entirety of the lot’s cost.
- Down Payment — okay, down payment concerns are not specific to new construction loans. However, the type of loan can affect how much of your own money the bank will require you to put down.
For more information about new construction hard money loans in Denver or across Colorado, contact TABS, LLC.