Ground-up construction loans are short-term financing solutions that allow experienced real estate investors and developers to build a property from the ground up on raw or vacant land. Unlike traditional renovation or fix-and-flip loans, which work on existing structures or existing homes, these loans fund everything from land acquisition to labor and materials, acting as an entry point to a permanent loan once the project is completed.
These types of loans are commonly used to finance single-family homes, new home construction, multifamily units, mixed-use developments, and even commercial properties. The goal is to provide capital for each stage of the building process, ensuring developers have what they need to take a project from raw land to a fully completed structure.
The short-term nature of ground-up construction loans gives developers the flexibility to complete a project and then refinance, sell, or transition into long-term financing.
Ground-up construction loans are structured differently from traditional loans. Instead of getting the full amount upfront, borrowers receive funds in stages, based on a draw schedule that matches each phase of the construction process.
Lenders disburse funds in stages based on progress. This ensures that funds are only released when needed, reducing risk for both parties. A third-party inspector typically verifies completed milestones before additional draws are approved.
These loans are designed to finance all core aspects of a new build, offering a flexible structure that supports developers from day one.
Coverage may include the following:
Not everyone is eligible for a ground-up construction loan. These loans carry higher risk, which is why lenders set clear borrower and project requirements, including an appraisal. While specific criteria vary, certain key elements are consistent across the industry.
Lenders look for experience, financial stability, and strong creditworthiness. At Red Tower Capital, we consider multiple factors rather than just a credit score, but generally, borrowers should have:
Lenders expect detailed documentation to understand the viability of your project. These may include:
At Red Tower Capital, we have been financing ground-up construction projects across California since 2011. Our in-depth understanding of the market, along with our flexible underwriting process, allows us to move quickly and offer creative solutions when traditional banks fall short.
If you're an experienced developer or builder seeking financing for your next construction project, Red Tower Capital offers tailored financing solutions to meet your needs. With our quick underwriting and approval process, you can focus on what you do best, building quality real estate projects.
To discuss your project and learn more about our flexible financing options, contact us directly or apply now to get a quote for your specific loan scenario.