Construction Loans in Los Angeles, CA

Speculative home construction involves building single-family residences without pre-sale commitments, marketing completed homes to end buyers. This strategy offers higher profit margins than fix-and-flip projects but requires longer timelines and greater capital commitment. Our spec home construction loans provide acquisition financing for entitled lots plus construction funds disbursed through draws as building progresses. We typically structure these loans at 70-80% of total project cost (lot purchase plus construction budget) with interest reserves that cover payments during the construction and marketing period. Loan terms range from 12-24 months depending on project scope and market conditions. We evaluate spec home projects based on comparable sales in the immediate neighborhood, builder track record, and realistic construction timelines. Los Angeles spec home opportunities exist throughout the county, from luxury new construction in the Westside and Pasadena to more affordable infill development in the San Fernando Valley and emerging neighborhoods.

Custom home construction financing serves developers building homes under contract with specific buyers or homeowners building their dream residences. These projects often involve higher specifications, unique designs, and more personalized construction processes than spec homes. Our custom home loans accommodate the specific requirements of contracted builds, including milestone-based draws that align with construction phases and client payment schedules. For developer-built custom homes where buyers make construction deposits, we can structure loans that consider these deposits as equity. For owner-builder scenarios, we work with experienced owner-builders who have general contracting capabilities or professional project management support. Custom home projects require careful documentation of specifications, change order procedures, and completion timelines to ensure successful execution. Our loan administration includes regular site inspections and draw verification to keep projects on track.

Commercial ground-up construction encompasses office buildings, retail centers, industrial facilities, and mixed-use developments built for investment or sale. These projects involve longer timelines, more complex permitting, and higher capital requirements than residential construction. Our commercial development loans serve experienced developers with track records of successfully completing similar projects. Loan structures typically provide 60-70% of total project cost with terms from 18-36 months to accommodate extended construction and lease-up periods. We evaluate commercial projects based on pre-leasing commitments (where applicable), market demand analysis for the proposed use, developer experience, and realistic construction and absorption timelines. Common commercial development opportunities in Los Angeles include industrial buildings near transportation corridors, retail centers in underserved neighborhoods, office buildings in revitalizing areas, and mixed-use projects combining residential and commercial components.

Major renovation projects often involve construction scopes comparable to ground-up development, including structural modifications, systems replacements, and significant square footage additions. Our renovation construction loans finance extensive improvement projects on existing properties, providing both acquisition capital (when applicable) and construction funding. These loans accommodate the unique challenges of working within existing structures, including unknown conditions discovery, code compliance upgrades triggered by renovation scope, and coordination with occupied spaces in partially-tenanted buildings. We structure renovation loans with appropriate contingency reserves, typically 10-15% of construction costs, to address unexpected conditions without project disruption. Draw schedules account for the phased nature of renovation work, ensuring funds are available when needed for material purchases and subcontractor payments. Common applications include multi-family repositioning projects, historic building renovations, and adaptive reuse conversions.

Construction loans disburse funds through a draw process tied to completed work. You submit draw requests based on work completed since the last draw, supported by invoices, lien releases, and inspection reports. We send inspectors to verify completed work before releasing funds. Approved draws are typically funded within 24-48 hours. Most projects have 4-6 draws over the construction period, though we can accommodate more frequent draws for larger projects. You pay interest only on drawn amounts, not the total loan commitment, reducing carrying costs during construction.

We typically finance 70-80% of total project cost (land acquisition plus hard and soft construction costs) for experienced builders with strong track records. First-time developers or higher-risk projects may qualify for 65-70% maximum leverage. Your equity contribution covers the remaining project costs. For exceptionally strong projects in prime locations with proven builders, we may consider higher leverage. The specific percentage depends on project type, location, builder experience, market conditions, and the quality of your exit strategy.

Construction loan terms range from 6-12 months for renovation projects, 12-18 months for single-family spec homes, and 18-36 months for commercial developments or larger residential projects. Terms include both construction and marketing periods for spec projects. We build realistic timelines based on construction scope, permit processing estimates, and market absorption rates. Loans include extension options if projects extend beyond initial terms due to factors beyond your control, typically at predetermined extension fees.

Construction loans include contingency reserves, typically 10-15% of hard costs, to address unexpected expenses. If cost overruns exceed contingency reserves, we work with borrowers to develop solutions including additional equity contributions, scope reductions, supplemental financing, or cost reallocation from other budget line items. We emphasize realistic budgeting upfront and regular project monitoring to identify potential issues early. Our goal is supporting successful project completion, and we work collaboratively with borrowers to address challenges that arise during construction.

Unlike many conventional construction lenders, we don't typically require pre-sales for spec residential projects. We underwrite based on comparable sales in the immediate neighborhood, current market conditions, and your track record as a builder. However, pre-sales can improve loan terms and reduce required equity. For commercial projects, pre-leasing may be required depending on project type, size, and location. We evaluate each project individually and structure financing appropriate to the specific risk profile and market conditions.