Business
The Ultimate Guide to the Different Types of Construction Loans
You’ve got the drive and energy to take your property ownership dreams to the next level. So, you’re seriously considering investing in more real estate during the next few months.
Smart thinking.
Research shows that investments in residential real estate averaged a return of more than 10% in the United States in 2021. So, if you want to capitalize on the current market, now couldn’t be a better time to do so.
There’s just one problem: Although your drive and energy levels are high, your coffers are currently low. Fortunately, that’s where construction loans come in.
Here’s a rundown of your construction loan options so you can determine the best one for your needs.
Construction Spec Loans
The construction spec loan is one of the best types of loans for growing your sales while also saving money.
This type of loan is designed for those who wish to build spec homes—houses constructed based on the belief that they will generate a profit when sold. When you build a spec home, you do so without a specific purchaser in mind.
How to Get This Loan
You can qualify for this loan if you have a minimum of three years of building experience. In addition, you should have constructed a minimum of five houses in past years.
To get this loan, you must also prove that you have the required licenses for building and are building full-time. Your potential lender will also want to assess your professional and personal credit histories before lending you the funds you’re requesting.
Note that spec home loans can be obtained for only certain types of properties as well. These include townhouses, single-family houses (detached), and condos.
Fix-and-Flip Loan
Fix-and-flip loans are another option for constructing houses you wish to quickly turn around and sell as part of your business.
How to Get This Loan
Before a lender provides you with this loan, you must show that you possess experience as a construction builder, flipper, remodeler, or investor.
As with a construction spec loan, you must provide proof of your building credentials. In addition, you should offer evidence of previous employers’ and clients’ satisfaction. Acceptable credit history is also required to obtain a fix-and-flip loan.
Fix-and-flip loans can generally only be used on single-family houses that are detached, as well as townhomes.
Take Advantage of the Top Construction Loans Today
Creating your dream real estate empire can certainly feel like a daunting task. However, with the right types of construction loans, you can be well on your way to expanding your property portfolio and engaging in more sales transactions.
Consider the above-listed types of loans as you seek to grow your real estate investing business. One positive borrowing experience is all it takes to activate your vision and achieve your investing goals in the years ahead.
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Kenneth is a proud native of sydney, born and raised there. However, he pursued his education abroad and studied in Australia. Kenneth has worked as a journalist for almost a decade, making valuable contributions to prominent publications such as Yahoo News and The Verge. Currently, he serves as a journalist for The Hear Up, where he focuses on covering climate and science news. You can reach Kenneth at bloggerjohnsmith12@gmail.com.