$1.85 million new construction case study

Hi,

Before we jump into today's topic, I'm excited to share the new Be the Bank site. I ventured into coding this year and developed the site from scratch with Ruby/Rails and TailwindUI. It's pretty simple for now, but I have some fun features planned for the upcoming year. For now, you can revisit older editions of the Be the Bank newsletter.

Earlier this year, I wrote about why we're funding more new construction projects, highlighting the surge in such ventures we've financed. This uptick - over three times more in previous years - is driven by a few key trends:

1. Local Banks’ Caution: Their hesitant approach has opened more doors for private lenders like Longleaf.
2. Shifts in Borrower Strategy: Some of our experienced borrowers are pivoting their strategies to adapt to current market conditions.
3. Persistent Demand: There’s a continuous need for affordably-priced or well-located housing, which these projects cater to.

Case study: a successful build in the Houston Heights

One of our notable projects this year was a 3,750 square-foot house in a prime Houston neighborhood. Given my familiarity with the area (I live less than a mile from the site), we felt confident financing this one. Here are the details:

• Total Loan Value: $875,000
• Initial Funding: $385,000 at close (71% loan-to-purchase price)
• Construction Budget: 100% funded at $490,000
• LTV: 55% based on an appraised value of $1.6 million

The property was listed last month and went under contract within just four days, close to its listing price of $1.85 million. This brings the LTV down to a comfortable 47% – a solid figure by any standard.

This project was one of the borrower’s first new builds, but he’s been steadily gaining experience for such undertakings. He’s already acquired several more lots in the area, aiming to replicate this strategy in 2024.

That's it for today. Merry Christmas and Happy Holidays!