Talk to a Lending Advisor: (512) 883-2092
Real Estate Investor Loans
Ground-up development and major renovation financing for builders and developers. Fast draws and flexible terms to keep projects moving.
Ground-up construction financing
Draw schedule based on project milestones
Interest-only during construction
Fast approval for qualified builders
Flexible loan structures
Construction loans provide the specialized financing necessary to transform vacant land or existing structures into income-producing real estate assets. Unlike purchase loans that fund acquisition of completed properties, construction loans disburse funds gradually as building milestones are achieved, matching capital availability with project progress. This milestone-based approach protects both lenders and borrowers while ensuring adequate funding throughout the construction period.
Hard money construction loans fill a critical gap in the development financing landscape. Traditional construction lenders, typically banks and credit unions, impose stringent requirements including extensive builder experience, prescriptive documentation, lengthy approval timelines, and conservative loan-to-cost ratios. These constraints often exclude emerging developers, self-builders, and investors pursuing unique projects that don't fit conventional templates.
Austin's construction market presents both opportunities and challenges for developers. Strong demand for housing across all price points, limited land availability in desirable locations, and a robust economy support development projects. However, supply chain complexities, skilled labor shortages, and regulatory requirements create execution challenges that demand flexible, responsive financing partners. Hard money construction loans provide the capital and support structure necessary to navigate these challenges successfully.
Construction loans serve diverse development scenarios, from single-family spec homes to small-scale commercial projects. Understanding the available programs helps developers select appropriate financing for their specific projects.
Ground-Up Residential Construction: Single-family spec homes and small residential developments represent common construction loan applications. These loans fund land acquisition (if not already owned), site preparation, construction costs, and carrying expenses during the building period. Upon completion, the loan is typically repaid through property sale or refinance into permanent financing.
Major Renovation and Redevelopment: Properties requiring extensive rehabilitation, such as historic renovations, fire-damaged structures, or buildings with major systems failures, often qualify for construction-style financing. These projects involve similar milestone-based funding and contractor oversight as ground-up construction, with draws released as specific renovation phases are completed.
Multifamily Development: Duplex, triplex, and small apartment building construction can be financed through hard money construction loans. These projects require more complex underwriting due to extended timelines and greater capital requirements, but offer significant profit potential in Austin's strong rental market.
Commercial Construction: Small-scale commercial projects such as retail pads, office build-outs, and mixed-use developments qualify for construction financing based on pre-leasing, tenant commitments, or market demand analysis. These specialized loans require lenders with commercial real estate expertise who understand lease structures and tenant improvement requirements.
Interest Reserve Structures: Construction loans typically include interest reserves that make monthly payments during the construction period. This structure eliminates payment burdens while the project generates no income, allowing all available capital to flow toward construction completion. Reserve amounts are sized based on projected construction timelines and interest rates.
Construction projects face numerous challenges that can impact timelines, budgets, and financing requirements. Understanding these challenges helps developers plan effectively and maintain lender confidence throughout the project.
Cost Overruns: Construction projects routinely exceed initial budgets due to unforeseen conditions, design changes, material price fluctuations, or scope creep. Experienced developers build contingency reserves into their budgets, typically 10% to 15% of construction costs, and work with contractors who provide realistic estimates with appropriate contingencies.
Schedule Delays: Weather, permitting delays, supply chain disruptions, and contractor availability issues can extend construction timelines. These delays increase carrying costs and may trigger loan maturity issues if projects extend beyond original terms. Responsive lenders can provide extensions or additional financing to address unexpected delays.
Market Changes: Construction projects lasting many months face the risk of market shifts between project initiation and completion. Changes in interest rates, buyer demand, or comparable sales can impact the completed property's value and the developer's exit strategy. Conservative underwriting and appropriate loan-to-value ratios help mitigate these risks.
Our construction lending program is designed by developers who understand the realities of construction projects. We provide not just capital, but a partnership approach that helps projects succeed through inevitable challenges.
Flexible Draw Schedules: We work with developers to establish draw schedules that match actual construction sequencing rather than imposing rigid templates. Draws are processed quickly upon inspection approval, typically within 24 to 48 hours, ensuring contractors are paid promptly and work continues without interruption.
Builder-Friendly Terms: We understand that construction projects rarely proceed exactly as planned. Our loan documents include provisions for reasonable change orders, timeline extensions, and budget modifications that don't trigger technical defaults. We want projects to succeed, not to trap borrowers in rigid structures that can't accommodate reality.
Experienced Oversight: Our construction inspectors have actual building experience and understand construction quality standards. They provide meaningful oversight that protects the lender's interests while offering developers confidence that work is being completed to specification.
Austin's development landscape offers construction opportunities across residential and commercial sectors. Infill development in established neighborhoods, teardown-rebuild projects in appreciating areas, and small-scale multifamily construction all benefit from strong market fundamentals. The city's commitment to density and transit-oriented development creates additional opportunities for projects that align with these planning priorities.
Ready to explore construction loans for your next investment?
Construction loan draws release funds incrementally as specific project milestones are completed. After finishing a phase of work, the borrower submits a draw request with documentation of completed work. An inspector verifies completion, and funds are released, typically within 24 to 48 hours of inspection approval. Common draw schedules include foundation completion, framing, mechanical/electrical/plumbing rough-in, drywall, and final completion.
Hard money construction loans typically offer up to 70% to 80% loan-to-cost, covering both land value (if applicable) and hard construction costs. Soft costs such as permits, architectural fees, and interest reserves may be included or may require separate funding depending on the loan structure. Borrowers should expect to contribute 20% to 30% of total project costs as equity.
Most lenders require licensed, insured contractors with demonstrated experience in similar projects. Some lenders maintain approved contractor lists, while others evaluate contractors on a project-by-project basis. Self-builders face additional scrutiny and may be required to provide detailed qualifications, construction management experience, or third-party oversight.
Cost overruns are the borrower's responsibility unless they result from lender-required changes or documented unforeseen conditions. Experienced developers build contingency reserves into their budgets, typically 10% to 15%, and maintain backup funding sources for unexpected expenses. Some lenders offer additional financing for documented overruns that don't compromise project viability.
Construction loan terms typically range from 6 to 18 months depending on project scope. Single-family homes usually have 6 to 12 month terms, while larger multifamily or commercial projects may have 12 to 24 months. Most loans include single 3 to 6 month extension options with additional fees. Extensions beyond the initial term may be available but typically require significant additional costs.
Short-term hard money loans designed specifically for real estate investors who purchase, renovate, and resell properties for profit. Fast approvals and flexible terms to help you close deals quickly.
Short-term financing solutions that bridge the gap between the purchase of a new property and the sale of an existing one. Perfect for investors needing quick capital without waiting for traditional financing.
Long-term financing for rental property investors based on Debt Service Coverage Ratio (DSCR). Qualify based on property cash flow rather than personal income, making it ideal for self-employed investors.
Fast financing for commercial real estate investments including office buildings, retail spaces, and mixed-use properties. Quick approvals and flexible terms for experienced commercial investors.