In real estate, the right property does not always become available at the right time. An investor may identify a strong acquisition opportunity before plans, permits or other pre-construction requirements are complete. In those situations, waiting until a project is ready for construction financing can mean risking the property altogether.
A recent Unitas Funding closing in Franklin, Tennessee, shows why choosing the right financing strategy upfront matters.
The borrower had identified a three-acre property for a future ground-up construction project, but the plans and permits required to begin construction were still being finalized. Rather than wait for that process to finish and potentially lose the property, Unitas structured a $1,050,000 bridge loan at 75% loan-to-value that allowed the borrower to secure the site while continuing to work through the pre-construction process. The deal was closed by Ryan Bassinger, Unitas's Director of Originations.
The approach gave the borrower time to move the project forward without forcing the acquisition and construction timelines to align before the project was ready.
Permitting is an important consideration for investors planning a construction or significant renovation project. Requirements and timelines can vary considerably by county and municipality, particularly when a project involves changing a property's footprint, adding square footage or preparing a site for ground-up construction.
Depending on the project and jurisdiction, that process can take anywhere from weeks to several months. If the financing is not structured with that timeline in mind, permitting delays can consume a meaningful portion of a transition loan's term before construction even begins.
That is why investors should consider the full project timeline before selecting their initial financing. When an extended permitting or pre-construction period is expected, bridge financing can provide a way to separate the acquisition from the construction phase rather than trying to fit both into a single timeline.
Before closing, investors and their lender should have a clear understanding of the project's scope, anticipated permitting requirements and eventual construction plans. Those details can help determine the appropriate financing structure and ensure considerations such as loan-to-cost and timing are accounted for before the project moves into its next phase.