Overview
Construction projects represent the pinnacle of real estate value creation, transforming raw land or existing structures into income-generating assets that command premium prices in San Diego's constrained market. Our hard money construction loans provide the capital necessary to execute ground-up development, major renovations, and adaptive reuse projects throughout San Diego County. Whether you're a seasoned developer building custom homes, a contractor constructing spec homes, or an investor executing a multi-unit development, our construction financing delivers the speed and flexibility that traditional lenders cannot match.
San Diego's chronic housing shortage creates exceptional opportunities for developers who can deliver new residential units, yet traditional construction financing has become increasingly difficult to obtain. Banks require extensive pre-sales, perfect credit, lengthy approval processes, and burdensome draw procedures that can delay projects for months. Our construction loans eliminate these barriers, providing funding based on project merits and your development capabilities rather than rigid banking criteria.
Our construction loan programs accommodate diverse project types across San Diego's development landscape. Single-family spec homes, custom home builds, multi-family developments, commercial construction, and mixed-use projects all find financing solutions tailored to their specific requirements. With loan amounts ranging from $500,000 to $20 million or more, we can support everything from boutique infill projects to substantial ground-up developments in San Diego, Chula Vista, Oceanside, Escondido, and throughout the county.
How This Loan Works
Construction loans serve diverse development scenarios throughout San Diego's active building market. Ground-up residential construction represents a primary application, whether you're building custom homes for clients, speculative homes for sale, or multi-unit developments for rental income. These projects require substantial capital deployed over extended timelines, with funding needs evolving as construction progresses from foundation to finish.
Major renovation and adaptive reuse projects, effectively reconstruction within existing structures, also utilize construction financing. Converting obsolete commercial buildings to residential use, transforming outdated multi-family properties into modern units, or completely restructuring existing floor plans all require construction-level funding that hard money lenders can provide when traditional renovation loans fall short.
Commercial and mixed-use development increasingly drives San Diego's construction activity, from retail centers in growing neighborhoods to office buildings serving the region's expanding industries. These projects often involve complex phasing, pre-leasing requirements, and extended timelines that challenge traditional lenders but align well with flexible hard money construction financing.
Infrastructure and site development work, grading, utilities, roads, and other improvements necessary before vertical construction, can also be financed through construction loans. Land developers preparing parcels for sale to builders or future development utilize this financing to advance projects through the costly pre-construction phase.
Common Challenges
Construction financing presents unique challenges that make hard money lending essential for San Diego developers. The fundamental issue is funding timing, construction projects require capital on demand as work progresses, but traditional construction loans involve lengthy draw approval processes that can delay contractor payments for weeks. These delays cascade through project schedules, increasing costs and straining subcontractor relationships.
Presale and pre-lease requirements create significant barriers with traditional lenders, particularly for multi-family and commercial projects. Banks often require 30-50% pre-leasing or sales commitments before funding construction, a standard that eliminates many viable projects in early stages. Hard money construction loans evaluate project economics and market demand without requiring pre-commitments that may be impossible to achieve.
Complex project phasing and changing market conditions create ongoing financing challenges. Construction projects rarely proceed exactly as planned, with weather delays, material shortages, design modifications, and market shifts all affecting timing and costs. Traditional lenders struggle with these variations, while hard money lenders can adapt loan structures to accommodate realistic project evolution.
Completion risk and market uncertainty at project finish create concerns for all construction lenders. Projects started in strong markets may complete during downturns, affecting values and exit strategies. Construction loan terms must provide sufficient flexibility to accommodate market variations without forcing distressed asset sales.
Our Approach
Our approach to construction lending emphasizes partnership, speed, and practical understanding of development realities. We begin with thorough project review that evaluates site conditions, construction plans, contractor qualifications, budgets, and market absorption potential. This upfront diligence identifies potential issues before they become problems and establishes realistic expectations for all parties.
We structure construction loans with tailored draw schedules that align with your project's specific phases and cash flow requirements. Unlike banks that impose rigid inspection and approval processes, we work with efficient third-party inspectors and release funds quickly, typically within 24-48 hours of draw requests, to keep your project moving and your contractors paid promptly.
Throughout construction, we maintain communication about project progress, budget adherence, and any challenges that arise. If market conditions shift, timelines extend, or scope modifications become necessary, we work with you to adjust loan terms and ensure successful project completion. Our construction lending relationships often span multiple projects as developers come to rely on our responsiveness and reliability for their ongoing operations.
Frequently Asked Questions
How are construction loan funds disbursed during the project?
Construction loans disburse through a draw system tied to project milestones. After closing (which provides initial funds for site work and early construction), you request draws as phases are completed, foundation, framing, rough systems, finishes, etc. We conduct inspections to verify completion, then release funds typically within 24-48 hours. This protects the lender while ensuring your contractors get paid promptly.
What percentage of construction costs will you finance?
We typically finance 70-80% of construction costs (or total project cost including land) up to 65-70% of projected completed value. For experienced developers with proven track records, higher leverage may be available. The exact amount depends on project type, location, your experience, pre-sales or pre-leases (if applicable), and current market conditions.
Do I need pre-sales or pre-leases to qualify for a construction loan?
Unlike traditional lenders, we do not typically require pre-sales or pre-leases for construction loans. We evaluate the project based on market demand, location quality, your development capabilities, and overall project economics. Pre-commitments can improve loan terms but are not required for approval.
What happens if my construction project goes over budget or takes longer than expected?
We recommend including 10-15% contingency in construction budgets for unexpected issues. If costs exceed contingency or timelines extend, we can discuss options including additional advances (if project value supports it), loan modifications, or extension provisions. Open communication about project challenges is essential, we work with developers to find solutions rather than creating crisis situations.
Can you finance both the land and construction in one loan?
Yes, we can structure combined land and construction loans that provide acquisition funding for the land plus construction financing for the build. This approach can save closing costs and streamline the development process. We evaluate the total project cost and completed value to determine appropriate financing levels for the combined loan.