“It wasn’t long ago that bankers wanted a signed contract by the home buyer before approving a construction loan. Now banks are providing construction financing for speculative houses where a buyer has not been lined up,” according to David Crowe, the chief economist at the National Association of Home Builders.
This is great news for many small-sized homebuilders who have been sitting on the sidelines waiting to get back in. Beau Eckstein, Managing Director of SFR Ventures Inc., a designated broker for a private money fund, stated
“The private money world has really stepped up over the past five years to fund many of the projects that the banks would not touch.”
There is still a huge lack of urgency from the banks to lend on any spec construction projects but as long as there are good returns coming to the investors placing their money into these private funds there will be an ongoing demand for these private money construction loans.
Eckstein is starting to see other alternative funding sources coming into the market but is not concerned because there is such a need for capital in the home building space.
“The private money world will always be around and I feel like I have an advantage in the market. Not only can I put a deal together with my fund, I have the capabilities to structure private placement and broker to other funds, banks and niche lenders,” states Eckstein.