Construction Loans

Construction Loans are based on the value of the property when completed. Construction loans are generally constrained by ten (10) primary elements:

1. Loan amount needed to build
2. Loan To Value-As Completed
3. Debt Service Coverage Ratio-As Completed (and as Stabilized)
4. Typically the prospective value of the real estate is based on its ability to generate income after the property is completed and leased to 85% occupancy
5. The experience of the borrower/developer, area demographics, absorption of competitive space and market occupancy rates
6. Estimated Market Rent for all space(s)
7. Typical lease structure for all space(s):  (a) Average lease term (that is customary for the respective market), (b) Items paid by lessee (tenant) vs lessor (landlord).
8. Estimated property operating expenses (e.g., real estate taxes, insurance, utilities, etc.)
9. The total Construction Cost
10. The Land Value

The above are the main qualification areas for most any construction loan placement.

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