Thinking of building a new home or investment property? You’re not alone. Ground-up construction, also known as ground-up development financing, and new construction loans are becoming increasingly popular for real estate investors and property developers.
With the right construction financing, turning your real estate project vision into reality becomes much easier.
Start your application with YouLand in minutes.
Introduction: What Is a Ground-Up Construction Loan?
A ground-up construction loan provides financing to build a brand-new residential property on entitled land, which means the land has already gone through the necessary legal and regulatory approvals, such as zoning and permits, and is ready for development.
It covers the entire process—from land acquisition and permitting to construction and completion. YouLand’s Ground-Up Construction Loan is designed for infill vertical development of 1-4 unit residential properties, offering fast, flexible funding to help developers get their projects off the ground.
How Does a Ground-Up Construction Loan Work?
Unlike traditional loans, Ground-Up Construction Loan is disbursed in stages, or milestones, based on the progress of your construction project. This makes it an ideal option for builders and real estate investors who are ready to start a project from scratch and need funds throughout the construction process.
Here’s how it works step-by-step:
1. Application & Approval
First, you’ll need to provide the lender with key details about your project, such as land entitlement documents, your budget for this project,or information about your builder or construction team.
The lender, like YouLand, will analyze your project, considering factors like the land’s location, whether all necessary approvals are in place, your experience as a developer, and your exit strategy (how you plan to pay off the loan once construction is done, such as by refinancing or selling the property).
2. Draw Schedule
A draw schedule outlines when you’ll receive loan funds as the project progresses. Instead of giving you all the money upfront, the loan is paid out in stages, often linked to key construction milestones.
For example, you might receive funds after the foundation is poured, when framing is completed, and at final completion. In addition, progress verification is required before each new round of funding is released. This ensures that the work is completed as planned.
3. Interest-Only Payments
During the construction phase, you only pay interest on the portion of the loan that has been drawn (used), not the full loan amount. This helps you keep your monthly payments lower while the project is ongoing. Once construction is complete, you will begin paying back the full loan amount.
4. Exit Strategy
When construction is finished, you can either refinance into long-term financing or sell the property to pay off your loan.
Pro Tip: YouLand processes draw requests in as little as 24–48 hours, ensuring your construction schedule stays on track.
How It Compares: Ground-Up Construction vs. Renovation Loans
When considering financing for your real estate project, it’s important to understand the difference between ground-up construction loans and renovation loans. Here’s a comparison to help you choose the ideal option for your needs:
|
Feature |
Ground-Up Loan |
Renovation Loan / Fix-and-Flip Loan |
|
Purpose |
Build from scratch |
Repair or upgrade existing homes |
|
Land Purchase |
Included in loan |
Not usually included |
|
Funding Method |
Draws based on phases (“milestones”) |
Lump sum or reimbursement |
|
Project Scope |
Full construction |
Partial updates or remodeling |
YouLand offers a full suite of real estate investment loans, including both ground-up construction and fix-and-flip financing.
Our ground-up construction loans are tailored specifically for new builds, providing flexible funding options to help developers and investors bring new residential projects to life quickly and confidently.
Key Features of Ground-Up Construction Loans
Ground-up construction loans offer essential features that make them ideal for developers looking to build new properties:
|
Feature |
YouLand Ground-Up Construction Loan |
|
Loan Amount |
$100,000 – $20,000,000 |
|
Property Type |
1–4 Unit Residential Properties |
|
Loan Term |
12–24 Months |
|
Loan-to-Cost (LTC) |
Up to 80% |
|
Draw Turnaround |
24–48 Hours |
|
Geography |
43 U.S. States (select metro markets) |
|
Prepayment Penalty |
None |
|
Application Process |
100% Online |
With YouLand, you get nationwide coverage, a completely online application process, and fast, efficient draw management. Get a Quick Quote Now to see how we can help with your next project.
5. The Loan Process: Step-by-Step
Here’s how to get started with a ground-up construction loan from YouLand:
- Submit Your Application
Provide details about your project, including land information, budget, timeline, and contractor details.
- Underwriting & Approval
YouLand’s team evaluates your application and approves qualified borrowers quickly. We’ll assess the feasibility of the project and ensure it meets our criteria.
- Loan Agreement & Draw Schedule
After approval, you’ll receive a loan agreement outlining how funds will be disbursed, typically based on construction milestones.
- Construction Begins
As construction progresses, you can request draws based on milestones. Funds are released quickly to keep the project on track.
- Loan Repayment or Exit
Once the project is completed, you can either refinance into long-term financing or sell the property to repay the loan.
Tips for Success: Managing Your Ground-Up Construction Loan
To ensure your project runs smoothly and stays on schedule, follow these tips:
- Plan Thoroughly: Have a clear scope of work, detailed budget, and timeline before applying.
- Hire Experienced Contractors: Lenders want to see that your team has the skills to execute the project successfully.
- Monitor Progress Closely: Regularly track construction progress to avoid delays and potential funding issues.
- Communicate with Your Lender: Use YouLand’s digital loan portal to easily manage your loan, request draws, and track disbursements.
Pro Tip: With YouLand’s 100% digital platform, you can handle everything online—from application to funding—saving you time and hassle.
Conclusion: Flexible Financing for Ground-Up Success
Ground-up construction loans are a powerful tool for real estate developers looking to build new properties from the ground up. They offer full funding for new builds, fast approvals, and flexible terms.
With clear advantages over renovation loans, and strong support from lenders like YouLand, ground-up loans offer:
- Full funding for new builds
- Fast approvals and draw turnarounds
- Transparent, flexible terms
Whether you’re building your first project or your fiftieth, YouLand’s Ground-Up Construction Loan can help you build with confidence.
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