Case Studies
Real-world examples of new construction loans.
Scenario
A real estate agent with rental property experience wanted to build their first ground-up construction project. They purchased a lot in a growing suburb for $175,000 and planned to build a 2,500 sq ft home with estimated construction costs of $375,000. The after-completion value was appraised at $700,000.
Solution
As a first-time developer, they qualified for standard terms with 70% LTV and 75% LTC. The maximum loan amount was $412,500 (75% of $550,000 total cost). The borrower contributed $137,500 (25%) in equity. The loan was structured with a 12-month term and monthly interest-only payments.
Outcome
The project was completed in 10 months and sold for $725,000, exceeding the projected value. The loan was repaid in full, and the developer made a profit of approximately $175,000 after all costs.
Scenario
A partially completed single-family home project was abandoned by the original developer after completing the foundation and framing. The property was acquired by an experienced developer who needed financing to complete the project. The purchase price was $250,000, and estimated remaining construction costs were $300,000. The after-completion value was appraised at $700,000.
Solution
With 3+ completed projects, the developer qualified for experienced terms with 75% LTV and 80% LTC. The maximum loan amount was $440,000 (80% of $550,000 total cost). The borrower contributed $110,000 (20%) in equity. The loan included special provisions for inspecting the existing work before proceeding.
Outcome
The project was completed in 8 months and sold for $710,000. Despite some unexpected issues with the existing structure that required additional work, the contingency reserve covered the extra costs, and the developer made a profit of approximately $160,000.
Scenario
A developer with extensive experience wanted to build a 4-unit townhouse project in an urban area. The land cost was $400,000, and estimated construction costs were $1,200,000. The after-completion value was appraised at $2,000,000. The developer had successfully completed 7 similar projects in the past 5 years.
Solution
With premium experience, the developer qualified for 80% LTV and 85% LTC. The maximum loan amount was $1,360,000 (85% of $1,600,000 total cost). The borrower contributed $240,000 (15%) in equity. The loan was structured with a 12-month term and included provisions for phased construction and draws.
Outcome
The project was completed in 14 months, requiring a 6-month extension due to some permitting delays. All units were sold within 3 months of completion for a total of $2,100,000, and the developer made a profit of approximately $500,000 after all costs and interest.
Scenario
An experienced developer was building a luxury single-family home with an original budget of $800,000 ($200,000 land, $600,000 construction). Three months into construction, market research indicated that adding a basement apartment would significantly increase value and rental potential. This change would add $150,000 to construction costs but increase the after-completion value from $1,100,000 to $1,400,000.
Solution
The developer submitted a formal change order with updated plans, budget, and timeline. The loan was modified to account for the increased costs and value. The LTV remained at 75%, but the loan amount increased from $600,000 to $712,500 based on the new value. The developer contributed additional equity to maintain the 15% requirement.
Outcome
The modified project was completed in 15 months. The property appraised at $1,450,000 and generated significant rental income from the basement apartment. The additional investment in the design change yielded a higher return than the original plan would have provided.
Scenario
A developer was building a 3-unit residential building with a 12-month projected timeline. After 6 months of construction, the project faced significant delays due to material shortages, labor issues, and unusually severe weather. The projected completion date was pushed back by 5 months.
Solution
The developer proactively communicated with The G1 Group, providing documentation of the issues and an updated construction schedule. They applied for the first 6-month extension before the initial term expired, paying the required extension fee and maintaining good standing on the loan with timely interest payments.
Outcome
The extension was approved without complications. The project was ultimately completed in 17 months, and all units were sold within 2 months of completion. Despite the delays and additional interest costs, the project remained profitable due to rising market values during the extended construction period.
Scenario
During excavation for a new single-family home, the contractor discovered unexpected rock formations requiring specialized equipment and additional labor. This added $40,000 to the foundation costs, which was not anticipated in the original $500,000 construction budget. The contingency reserve was only $25,000.
Solution
The developer immediately notified The G1 Group of the issue, providing documentation from engineers and contractors. The $25,000 contingency was accessed, and the developer contributed the additional $15,000 in equity to cover the shortfall. The construction schedule was adjusted to account for the delay.
Outcome
Despite the initial setback, the project proceeded smoothly after resolving the foundation issues. The home was completed within the revised timeline and budget. The additional investment in proper foundation work actually enhanced the property's value and marketability, resulting in a sale price $30,000 above the original appraisal.