One thing to look out for is what are called “levels.” These are structural amenities near the proposed building site, such as paved roads, power lines, and water mains. These prospective properties look like undeveloped parcels in existing suburban neighborhoods, or what’s called “infill” in more urban environments. Infill projects put new buildings on sites that already have infrastructure in place. Choosing to build on land that already has level in place makes it easier to get building plans and permits. Having local level makes it easier for investors to obtain financing. Lenders recognize the difficulty and upfront costs of developing level in an area that has no level at all, and these developments are sometimes seen as a deal-breaker.
It is often easier to find sites with well-maintained horizons in less rural areas, and for this very reason, lenders may turn down construction on rural properties, preferring loan deals in urban or suburban areas.
Plans and permits in place
Without plans and permits, new construction deals are at a standstill. For investors, especially those with experience in renovating and flipping homes, the idea of having to keep things “up to code” is not new. The same is true for new construction homes, but the requirements are much stricter. Plans and permits must be in place before construction can begin, and often before financing can be secured. These documents are standard across the U.S. housing market, including Zoning Confirmation, Zoning Compliance Reports, and Certificates of Entitlement, but compliance standards always vary depending on the local government where the project is being built.
Bureaucracy takes time, but so does obtaining permits and approvals for new construction. To stick to desired construction timelines, it is essential that investors keep track of their paperwork and apply for permits and approved plans in a timely manner. Investors working with lenders for financing may find that despite their best planning, plans and permits have not been approved prior to closing. In these cases, investors may be able to ask a third-party architect working for the local government to review the proposed plans. Similarly, investors can ask their local council to review the proposed plans if ordinances allow it. Knowing these and other options available to investors is essential to securing construction financing.
Many lenders consider the investor’s experience in new construction projects. Investors seeking financing for new construction projects may find that certain lenders want to ensure that the investor has experience in construction, or at least renovation of real estate projects. This is where having an experienced builder or general contractor comes into play. General contractors are screened for qualifications such as up-to-date licenses, verified references, and project history to ensure that the project can be completed (on time, to standard), to standards, and in compliance.
