How to Secure Speculative Building Financing in Arizona

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How to Secure Speculative Building Financing in Arizona

There are several key points that will influence securing Speculative Building Financing in Arizona. Understand what these are so that funding for your spec home or building is effortless and quick.

There are several factors that will influence Speculative Building Financing in Arizona:

· Prices of houses in the market you are looking at

· The absorption rates of the homes in the market you are looking at

· How healthy is the job market?

· How sustainable is the infrastructure in the area that you are looking at

· The amenities in the area

· The specific designs and tastes of the homes in the area

In new home construction, approximately three-quarters of the new single-family homes in 2016 were built on speculation. Although Speculative Building Financing in Arizona can be challenging, it also can be very lucrative. There are two types of new homes—one is built on speculation and the other is custom built. A spec home is the construction of a new home with no identified buyer while a custom-built home is a home that has been commissioned by an individual buyer.

Mixed-use property as well as commercial and single-family homes can all be built on speculation. However, spec homes are mostly entry level homes and affordable homes built in upcoming communities. The spec home is built in an existing development. Tract home construction is also used by developers and investors. These are homes of similar square footage, materials and floor plans are located within a single development.

Speculative Building Financing in Arizona — Spec Home Construction loans in Arizona

These loans are short-term in nature and carry interest-only payments during construction. A balloon payment is due when the house is sold. The mortgage from the buyer pays off the construction loan. Loan requirements vary widely. The range that is offered by lenders is from zero-down financing to 50 percent or more equity. You may be required to have some equity in the land to qualify for the loan. You will need to have demonstrated your experience in building spec homes as well as a review of your financial statements and tax records. To assure the lender that you have enough cash to complete the project, a proof of funds may be required.

The lender will review the condition of the property and the location. They will also need to have clear title. A professional business plan will be required. This will include the information on your team, the subcontractors you will use, detailed budget, blueprints, loan draw schedule and work schedule. The selling price of projects in the area will also support your request for financing.

Any investor in a spec home will need a thorough understanding of the local housing market. All costs will ultimately be passed on to the purchaser of the home, so you will need to balance costs and features in the home to make the home sell.

Controlling costs and stability are two advantages to build on spec. While there are unforeseen problems with rehabbing, new construction has few. All spec homes are not guaranteed to sell; you risk the home not selling if the home doesn’t meet the local needs of the buyers, overbuilding, and a home that does not get the sales price, resulting in a net loss. We, at Level 4 Funding, have financed many an investor looking to build their first or their fiftieth spec home. Call us for a no-obligation quote.

Dennis Dahlber Broker Ri CEO Level 4 Funding LLC
Dennis Dahlberg


Level 4 Funding LLC 
Hard Money Lender

Hard Money Loans

Hard Money Loan

Arizona Tel:  (623) 582-4444

Texas Tel:      (512) 516-1177

Dennis Dahlberg Broker/RI/CEO

NMLS 1057378 | AZMB 0923961 | MLO 1057378

22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027

111 Congress Ave | Austin | Texas | 78701  

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

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