An A&D loan — acquisition and development — is the facility developers ask for when they mean “buy the tract, put in the streets, and get lots I can sell or build on.” Banks often hear that sentence and hand you a land brochure or a house construction application. Those are different loans. Jaken Finance Group prices A&D on the collateral that exists today and on the work that will exist at the next inspection.
Qualified construction and bridge files price at 8.99%–13.5% interest-only. Land-only pieces typically sit at 50%–65% of as-is value. Close targets 10–14 business days when title, entity, and the civil story are already in motion. Houses after lot release use spec and build-to-rent construction or ground-up construction. Stabilized rentals exit toward DSCR at 5.75%–10.5%.
If you need the operating playbook — plats, hearings, bonds — use the subdivision development guide and subdivision development financing. This page is the money path: how an A&D stack is sized, how the interest reserve is built, how lots release, and when we pass.
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What “A&D” means in underwriting
Sponsors use A&D as a shorthand. Underwriters split it.
Acquisition is control of the dirt. You close on acreage, an option, or a contract with a hard date. The collateral is land. There is no street, no recorded lot, and no house. Leverage stays conservative because a hearing can fail and a wetland flag can sit for a season.
Development is the horizontal work that creates finished lots: grading, streets, water, sewer, storm, and dry utilities, plus the bonds and inspections that let a city accept the work. Draws follow inspection the same way vertical construction does. Interest-only during the work.
An A&D loan can cover both pieces in one sequenced facility, or it can be a land bridge that later converts into a horizontal draw loan. The sequence is not a slogan. It is how we keep land leverage from pretending it is lot inventory.
The U.S. Census Bureau’s new residential construction releases are a useful check on whether your absorption story matches what builders are actually starting. We do not underwrite a takedown schedule against a national headline. We underwrite it against the subdivision next door and the builder who already walks your lots.
A&D vs land loan vs construction loan vs HUD
| Product | Collateral today | What it funds | Typical leverage | Wrong use |
|---|---|---|---|---|
| Vacant land loan | Acreage, maybe an option | Carry until a hearing or a sale | 50%–65% as-is | Asking for house LTC on dirt |
| A&D loan | Land plus a real plat path | Land + streets/utilities + lot inventory | Land band, then draw LTC on work | Treating a rendering as finished lots |
| Vertical construction | Legal lot, plans, GC | The house or building | Lower of cost and 75% as-completed | Funding streets out of a house draw |
| HUD 221(d)(4) and cousins | Large multifamily construction | Agency construction with long timelines | Agency rules | A 12-lot plat that cannot wait a year |
If two rows both feel true, pick the earlier phase. We can sequence later. We cannot pretend unplatted acreage is a house loan.
HUD construction programs exist for a reason. They are slow, document-heavy, and built for a different sponsor. Jaken Finance Group does not originate HUD 221(d)(4). If that is the product you need, stop here and call a HUD lender. If you need a private A&D facility that can close on a civil set and a takedown calendar, keep reading.
What an A&D facility actually funds
Land and entitlement carry. Survey, access, environmental flags, and a written hearing calendar. This is still a land file. Leverage does not jump because you hired an engineer.
Horizontal draws. Preliminary plat is real. Construction plans exist. You have a contractor bid or a sealed engineer’s estimate for streets, water, sewer, storm, and dry utilities. Each draw waits on inspection. Interest-only on the drawn balance.
Finished-lot inventory. Lots are recorded. Public improvements are accepted or bonded. You may hold lots while builders take them down, or you may build the first houses yourself. The loan is now inventory, not a dirt story. We want a takedown schedule or a self-build plan, not “the market will absorb them.”
What it does not fund. Vertical houses. Model homes dressed up as horizontal cost. Marketing trailers. Sponsor overhead. Off-site utilities treated as a footnote. A 200-lot master plan with no sponsor liquidity and no recorded plat path.
Phase detail, bond language, and lot-release mechanics that cities actually enforce live on horizontal costs and bonding and entitlement and platting. Read those before you ask us to max leverage on acreage.
Interest reserve sizing — the question most term sheets skip
A&D files die on carry, not on dirt price. Streets take longer than the spreadsheet. Hearings slip. Inspectors book two weeks out. The first builder takedown lands in month eleven instead of month seven.
Reserve months = months until cash comes in, not months the contractor promised.
Build the calendar in this order:
- Land close to first horizontal draw. Title, bonds, and a pre-construction meeting. Often 30–60 days even when everyone is motivated.
- Horizontal duration. Use the civil estimate, then add weather and inspection lag. A northern winter or a hurricane season is not a rounding error.
- Acceptance or bond reduction. Cities do not release lots the day asphalt cools. Ask the engineer how long acceptance took on the last plat in that town.
- First takedown or first vertical close. Cash in. Until then, interest is a cash drain.
Interest is charged on the drawn balance. A file that draws land on day one and streets over eight months does not pay interest on the full commitment from day one — unless the structure says it does. Read that line. If the facility funds land at close, the reserve must cover land interest for the whole horizontal period, not just the last three draws.
Example: 14-lot plat, $2.1M A&D commitment
| Line | Amount / months |
|---|---|
| Land allocation | $720,000 |
| Horizontal budget (streets, utilities, storm) | $1,180,000 |
| Soft costs and bonds (cash, not loaned) | $190,000 |
| Interest-only rate used in the model | 10.5% (inside 8.99%–13.5%) |
| Land drawn at close | Month 0 |
| Horizontal draws | Months 2–10 |
| First builder takedown | Month 12 |
| Last lots still held | Months 12–16 |
Land interest for twelve months on $720,000 at 10.5% is about $75,600. Horizontal interest is lower at first and rises as draws fund. A simple (and conservative) model treats average drawn horizontal of $590,000 for nine months: about $46,500. Total interest before the first takedown: roughly $122,000.
If the sponsor reserved “six months on the full $2.1M” they reserved about $110,000 and called it done. They are short before the first lot releases. If they reserved “six months on land only” they are worse. The reserve that survives is the one that follows the draw curve and the takedown date, then adds two months for a slipped inspection.
We will not invent a reserve that makes the debt service look pretty. We will size the reserve so the file can finish.
Lot-release provisions and takedown schedules
A lot-release provision is the rule that pays the A&D loan down when a lot leaves the collateral pool. Without it, a sponsor can sell the best lots, keep the worst, and leave the lender with leftover dirt and leftover debt.
A release price that works usually has three pieces:
- Allocated basis. That lot’s share of land plus horizontal cost.
- A release premium. Extra paydown so remaining lots still cover remaining principal.
- A minimum release. A floor so a cheap insider sale cannot bleed the facility.
Example: 14 lots, $1.9M remaining after land-and-horizontal draws
Allocated basis per lot if costs were even: about $136,000. They are never even. Corner lots and walk-out lots carry more. A release at 100% of allocated basis on the first four lots leaves the last ten carrying a larger share of leftover interest and any cost overrun.
A release at 120% of allocated basis on early takedowns — about $163,000 per lot in this even-cost sketch — pays the loan down faster than the dirt leaves. That is the point. Builders will negotiate. We will not release a lot for a number that makes the last phase unlendable.
Takedown schedule. A production builder who says “ten lots in year one” needs a written pace, a deposit, and a walk-away that does not dump finished lots back on you at a discount you cannot carry. A self-build plan needs a vertical facility lined up for the first two houses, not a hope that retail buyers appear when the street is open.
If you are selling lots, the A&D file is an inventory loan. If you are building the houses, say so and pair the release with spec / build-to-rent financing. Do not hide a vertical plan inside a horizontal budget.
How horizontal debt rolls into vertical
The clean structure is three conversations, not one blob:
- Land / A&D until lots exist.
- Lot inventory if you will hold finished lots.
- Vertical construction on each released lot — inspected draws, as-completed comps, a sale or rental exit.
Sometimes one relationship sequences all three. The budgets still split. A house draw does not pay for a lift station. An A&D draw does not pay for cabinets.
When a horizontal job stalls — streets half in, GC gone, city holding acceptance — that is not an A&D upsize. That is a mid-construction refinance conversation on remaining work, liens, and a new contractor. Bring photos, the remaining civil bid, and the current loan terms.
What moves pricing inside 8.99%–13.5%
The published band is not a menu. Files move inside it on:
- Entitlement reality. Recorded plat or a hearing date with a staff report beats a “friendly council.”
- Sponsor cash for soft costs. Bonds, impact fees, and engineering are often cash. A request to finance 100% of those is a pass.
- Absorption evidence. A builder letter, a lot-sale contract, or a self-build pipeline with GC capacity. Not a Zillow screenshot.
- Utility story. Municipal taps with a will-serve letter vs a well/septic or off-site main that is still a wish.
- Release math. A schedule that protects the tail lots.
Interest-only during the work. Term is usually 12–18 months on the development piece, with extensions when the civil story is real and the reserve is still standing.
When we pass
We pass when any of these are true:
- No path to a recorded plat — only a rendering and a hope.
- No absorption evidence and no self-build plan.
- No money for soft costs and bonds.
- Off-site utilities treated as a footnote.
- A request to max leverage on acreage as if it were finished lots.
- A 200-lot master plan with no sponsor liquidity.
- Owner-occupied housing. We finance investment property only.
That is not a smaller dream. It is a loan that can be repaid.
What “qualified” means on A&D
Track record can be flips and a couple of specs. It does not have to be a 40-lot resume. What it does have to be: a civil engineer who has recorded in that town, cash for soft costs, and an exit that matches absorption.
First-time sponsors with a strong local civil and a builder already walking lots can clear. First-time sponsors with a rendering and a max-leverage request on raw land do not.
Credit is reviewed. Approval rides on the dirt, the civil, the reserve, and the exit — not on a W-2 story.
Package to submit
Send this, not a teaser:
- Purchase contract or deed, entity docs, and a survey
- Zoning confirmation and the hearing calendar if you are not recorded yet
- Preliminary or final plat set and the engineer’s horizontal estimate
- Bond estimate and who writes the check
- Will-serve or utility letters
- Takedown schedule or self-build plan with the first vertical path
- Reserve calendar that follows the draw curve
- Exit: lot sales, houses, or a hold after DSCR takeout
New construction application · Submit scenario · Get approved · (833) 264-7776
A&D examples are nationwide lending illustrations on investor real estate. Rates, terms, and conditions apply only to qualified borrowers and may change without notice. Jaken Finance Group does not finance owner-occupied housing.