Financing Your Luxury Renovation: Construction Completion Loans Explained

Financing Your Luxury Renovation: Construction Completion Loans Explained

Question: Hi Beau, I'm currently in the midst of a substantial renovation project in Southern California. When the project is completed, the property's estimated value will be $5 million. Unfortunately, my permitting process has been significantly delayed, and I find myself running low on funds. I initially purchased the property for $2.3 million and currently have a conventional mortgage with a remaining balance of $1,800,000. Initially, I had budgeted $500,000 for construction, but it appears it will be closer to $1 million.
I'm in search of a second loan to ensure the successful completion of this project. I have a strong track record, and the after-repair value (ARV) is promising. Are there financing options available to assist with this situation?
Thank you, Tyler

- Tyler is involved in a significant renovation project in Southern California, aiming to increase the property's value from $2.3 million to $5 million.
- Due to permitting delays and a construction budget increase to $1 million, Tyler is seeking a second loan for successful project completion.
- Second construction completion loans for luxury single-family properties are usually provided by family offices or wealthy individuals ("whales") rather than institutional funds.
- The type of senior loan (conventional or hard money) and its duration play a crucial role in securing a secondary loan.
- Lenders will assess various factors, including the property's purchase price, construction costs, track record, and loan-to-cost ratio before approving a secondary loan for the renovation project.

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Timestamps:
(00:01) Question regarding renovation project and financial challenges.
(00:52) Explaining that second construction completion loans are typically provided by family offices or high-net-worth individuals.
(01:36) Importance of knowing the type of senior loan and the benefits of conventional financing.
(02:29) Explanation of the loan-to-cost ratio and required documentation for securing a second loan.

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About Beau: Beau Eckstein is a real estate entrepreneur, TV personality, and commercial mortgage advisor, specializing in construction financing and multi-family lending.

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