Ground-Up Construction Financing

What Is Ground-Up Construction Financing?

Ground-up construction financing funds the building of a new property rather than the purchase of an existing one. It follows the build itself: capital is advanced in stages as the project progresses from site work through completion.

Because there is no finished asset at the start, the review focuses heavily on the plans, the budget, the schedule, the builder and the projected value once the property is complete.

Land Acquisition vs Already-Owned Land

Some projects begin with a lot the investor already owns; others require acquiring the land as part of the transaction. Both are common, and how the land is treated affects how the overall project is structured.

Documentation on ownership, entitlements, zoning and site conditions is generally reviewed early.

Construction Budget

A line-item budget is the backbone of a construction request. It should reflect real bids or well-supported estimates, account for site work and soft costs, and include a contingency for the surprises most projects encounter.

Plans and Permits

Approved plans and permit status affect both the timeline and the financing structure. Projects that are permit-ready generally move through review more predictably than projects still working through approvals.

Draw Schedules

Construction capital is advanced against completed phases of work on a defined draw schedule. Each draw is typically requested with documentation and verified before funds are released.

Builders should plan working capital around that rhythm, since draws generally follow completed work rather than precede it. Specific procedures vary. [WJR POLICY TO BE CONFIRMED]

Construction Timelines

A realistic phase-by-phase schedule is as important as the budget. Weather, inspections, material lead times and subcontractor availability all influence the true timeline.

Completed / Stabilized Value

The completed or stabilized value is the projected value of the property once construction is finished and the property is in its intended operating condition. It is generally supported by an appraisal reviewing the plans, specifications and comparable properties.

Builder Experience

The track record of the builder or general contractor on comparable projects is a meaningful part of a construction review, alongside licensing, insurance and references.

Exit Strategies

• Sale of the completed property
• Refinance into long-term rental financing once stabilized
• Phased sales across a multi-unit or multi-lot project

Construction Loan Process

• Submit the project: land status, plans, budget, builder, timeline and completed value
• Initial review of the project and requested structure
• Valuation and third-party reports as required
• Underwriting review of the borrower, entity, builder and project documentation
• Closing, followed by construction draws as phases are completed
• Payoff at sale or refinance