Buy the land, build, then sell the homes or refinance into long-term debt and keep them: it is a sound plan and a common one. The question is which loan does which step. Investors often ask for a bridge loan because it is fast and flexible, but a bridge loan and a construction loan are built for different jobs, and land sits awkwardly between them.
Why a bridge loan on land alone is limited
A bridge loan is sized against the current value of an existing property and repaid by a sale or a refinance. Vacant land produces no income and has a narrower resale market than a finished home, so lenders advance much less against it, when they lend on it at all. A land-only bridge also leaves the construction money unsolved.
The structure that usually works
- Acquire the land: with cash, or with a construction loan that includes the land purchase if plans and permits are close to ready
- If you must close on the land before the project is ready to build, a short bridge on the land is possible, sized conservatively, with the construction loan as its exit
- Build with a ground-up construction loan: up to 85% LTC with Passy Capital, the land counting toward your equity or cost, the build budget released in draws after inspections
- Finish: certificates of occupancy, then a sale, or signed leases and a rent roll if you plan to hold
- Repay the construction loan with the sale proceeds, or with a refinance from a long-term lender
The three stages at a glance
- Land bridge (optional): sized on the land alone, short term, exit is the construction loan
- Construction loan: sized on total project cost, interest on drawn funds only, exit is a sale or a refinance
- Long-term loan (if you hold): from a long-term lender, sized on the finished, leased property
Testing the exit before you buy the land
The sale or the refinance has to repay the construction loan. For a sale, that means comparable sales of new homes that support the price you need. For a refinance, it means a finished, leased value and rents that support a large enough long-term loan; if they only support a smaller loan, you bring cash at the refinance.
Run that test at the land stage with realistic prices, rents and values for the finished homes. If the numbers only work on optimistic assumptions, change the plan before you are committed to the land.
Timing and seasoning
Long-term lenders usually want the property complete and leased, and some want a short operating history before they lend on the full appraised value rather than on cost. If you plan to hold, ask about seasoning when you take the construction loan, and set its term to leave room for the build, lease-up and the refinance itself.
US and foreign investors
The same structure applies to both. A non-US investor borrows through a US LLC, with no US credit history required. Passy Capital finances the land bridge and the construction loan from $500k to $5M, with term sheets within 24 hours.