Find an Investment Construction Loan for Single Family Residences
April 12, 2023
The real estate rental market continues to thrive across the Gulf Coast, especially as more people move to the region and need quality entry-level housing options. As a result, a growing number of individual investors are trying to meet this demand by constructing and developing residential homes as investment rental properties.
If you are an investor in need of financing options to construct a single-family residential property, consider an investment construction loan with Texas Gulf Bank.
Learn the basics of this loan option and why Texas Gulf Bank may be the ideal banking partner for your investment property construction needs.
The Basics of Investment Construction Loans
A construction loan is a short-term financing option for building a new single-family home or other residential property from the ground up. The funds from a construction loan are used to pay for all aspects of the construction project, including:
- Contractor fees
- Building materials
- Labor
- Permits and inspection
- Appliances
- Landscape materials
Unlike a traditional mortgage, investor construction loans work by distributing loan funds directly to the contractor to pay for construction costs. Funds are disbursed to contractors in segments (or draws) as specific construction phases are completed, known as a draw schedule.
Investment construction loans are usually shorter-term loans than permanent mortgage loans, sometimes with several months of interest-only payments, followed by principal and interest payments for the remainder of the loan term. If approved for this financing option, you will be advanced a set amount of funds based on the total land and building costs so construction can begin as soon as possible.
Qualifying For an Investment Construction Loan
Construction loan qualifications for rental properties differ from traditional owner-occupied construction loans. The ideal candidate for an investment construction loan is an individual investor with experience working with contractors and managing properties.
Our loan officers will talk to you about several preliminary factors to determine whether this loan type will be a good fit based on your plans. We will evaluate the following factors:
- Experience in managing rental properties
- Credit score and credit history
- Strength of the local rental market
- Borrower’s capacity to repay
- List of any outstanding debts
- Estimated rental property operating expenses
- Sufficient liquidity for equity payment
- Length of rental term agreements
If you plan to use the rental property for short-term rental purposes (less than a year at a time), this is considered a riskier investment that may result in additional lender requirements such as additional equity and proof of substantial liquidity.
In some cases, you may need to bring in additional investment partners to fund the required equity, support the project during times of vacancy, and strengthen your overall rental property experience.
How to Apply for Funding Through Texas Gulf Bank
If your project is considered viable, our loan officers will ask you to provide documentation during the loan application process. Our request includes, but is not limited to, the following information:
- Personal financial statement
- List of current assets and liabilities
- Current cash flow and contingent liabilities
- 3 years of personal and/or business tax returns
- Earnest money contract or closing statement on the building lot.
- Construction plans and building specs
- Budget with estimated line-item costs
- Cost and land survey for lot
- Market data with expected rental revenues
Once all required documents have been submitted, our in-house loan team will promptly review your application. You may experience an expedited loan application and approval process. Providing us with sufficient information for review in a timely manner helps.
If approved for a loan, you will receive funding to help start construction project work.
Choose Texas Gulf Bank for Investment Construction Loan Needs
Texas Gulf Bank is a community-based bank that strives to provide effective financing solutions to individuals throughout the Gulf Coast region. We have extensive experience financing investment construction loans, and we understand the unique needs of property investors.
If you want to take advantage of the housing rental boom and construct a new home to rent, consider an investment construction loan through Texas Gulf Bank. Contact us for more information, or complete the form below to begin the application process.
Let Texas Gulf Bank help you grow your real estate investment portfolio!
All Loans Subject to Credit Approval