Construction Loans

Laissez-Faire Capital Partners provides development financing options for ground up construction projects. Financing options are available both for land acquisition and construction. Construction loan options are available for single-family investor homes up to large multi-family projects, condominiums, town homes, hospitality and office / retail.

Laissez-Faire Capital Partners provides development financing options for...

Construction Lending	Parameters
Loan Type	Purchase Refinance-Value Add Ground Up (Conventional, Bridge, CMBS, Specialty Finance Available)
Asset Type	Multi-Family (1-4 Units Investor, 5 Units+) Mixed Use Warehouse/Industrial Retail/Office Strip Malls/Shopping Center Hospitality Hotel Assisted Living Facilities Storage Facilities
Loan Size	$500M-$100MM+
Loan Term	2yr-42yr options / full term construction to perm option available.
Interest Rate	Starting at 6% / Rate subject to change based off daily market index.
LTC (Loan to Cost)	Up to 90%
LTV (Loan to Value)	Up to 80%
ARV (After Repair Value)	Up to 75%
Closing Timeline	30 Days+
Amortization	20yr-42yr options available, 2yr+ interest only options available.
Minimum FICO	660+ Preffered (Deal Specific)
Document Requirements	No Tax Returns (Deal Specific)
Residency	US Citizenship (We work with foreign nationals)
Prepayment Penalty	Yield maintenance, Defeasance and step down prepay options available.
Lending Footprint	Nationwide
Liability	Non-Recourse/Recourse Options (Deal Specific)

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What is a Commercial Construction Loan?

A Commercial Real Estate (CRE) construction loan is a type of short-term financing specifically meant to cover the costs of constructing or renovating commercial properties.

How Does a Construction Loan work?

These loans are primarily used to finance the construction or major renovation of commercial properties, such as office buildings, retail spaces, warehouses, multifamily units, and more.

Construction Loan Structure

Draw System: Instead of receiving the full loan amount upfront, borrowers get funds in “draws” or stages. For instance, the first draw might cover land acquisition, the second for site preparation, the third for framing, and so on.
Inspections: Before each draw, the lender might require an inspection to ensure the project is progressing as planned. This way, lenders ensure their funds are used appropriately.
Term: Construction loans are short-term in nature, typically lasting for the duration of the construction project, which can be anywhere from a few months to a couple of years.

Loan-to-Cost (LTC):

Lenders will often determine the loan amount based on a Loan-to-Cost ratio, which represents the loan amount as a percentage of the total project cost. For instance, if a lender offers an 80% LTC on a project that’s expected to cost $1 million, the loan amount would be $800,000.

Interest Rates

During the construction phase, borrowers typically pay only the interest on the amount drawn, not on the entire loan amount.
Given their short-term nature and inherent risks, construction loans often have higher interest rates than traditional mortgages.

End of Construction Strategy

Mini-perm Loan: Once construction is complete, the construction loan typically doesn’t just end. It might transition into a mini-perm loan, which is a short-term loan that gives the developer time to lease out the property and generate revenue.
Take-out Loan: Alternatively, the borrower can obtain a more traditional, long-term mortgage known as a “take-out” loan. This loan “takes out” or replaces the construction loan.

What are the benefits of a CRE Construction Loan?

Flexibility: Construction loans offer flexibility, allowing developers to pursue projects that might not be possible without specialized financing.
Interest-Only Payments: Paying interest only during the construction phase can be less of a financial burden than paying both principal and interest.

Are there any Risks?

Cost Overruns: Construction projects can run over budget. If this happens, the borrower is typically responsible for covering the additional costs, unless there’s a contingency reserve set aside.
Project Delays: Delays can increase costs and extend the loan duration.
Leasing Risks: If a newly built commercial property doesn’t lease quickly, it can strain the borrower’s ability to start paying off the loan.

Summary

In summary, a CRE construction loan is designed to finance the building or major renovation of commercial properties. Borrowers should be mindful of the costs, timelines, and potential risks associated with construction and should consult with financial experts or lenders to understand the terms and conditions fully.

BRIDGE LOANS

$500M-$100MM

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