Deal snapshot
| Location | Paradise Valley, Arizona (Scottsdale fringe) — composite example |
| Property type | Custom SFR scrape (luxury spec) |
| Loan type | Ground-up construction — milestone draws |
| Loan amount | $1.05M (75% of $1.40M as-completed) |
| Close time | 14 business days from complete construction package |
Problem — land-heavy file, thin spread, wrong comps almost blew it
A repeat Arizona operator controlled a 1979 block ranch on a Paradise Valley lot north of Camelback and ran two columns: $285,000 gut versus scrape and custom vertical. Gut math showed $890,000 all-in and $1.05 million ARV — thin. Scrape math showed $1.42 million all-in and $1.40 million as-completed only after Paradise Valley comps replaced Arcadia tract imports.
The sponsor’s first lender quoted 90% LTC on a one-pager. Qualified luxury construction up to $2.5M can reach 100% LTC — but the value cap said 75% LTARV = $1.05 million on the corrected as-completed. Spread lives in submarket discipline and calendar, not a lower LTC ceiling on luxury.
Product pages: luxury new construction · spec home construction (national box) · Gut alternative: luxury fix and flip · Calculator: luxury spec LTC.
Property snapshot
| Line | Amount |
|---|---|
| Land / existing structure acquisition | $585,000 |
| Demolition and site prep | $28,000 |
| Vertical hard (3,680 sf × ~$158/sf) | $580,000 |
| Pool, hardscape, landscape | $94,000 |
| Soft costs, plans, engineering | $52,000 |
| Permits, fees | $12,500 |
| Contingency (~11% of hard) | $75,000 |
| Vertical stack subtotal | ~$1,426,500 |
| Interest + marketing reserve | $122,000 |
| All-in | ~$1,548,500 |
| As-completed (Paradise Valley custom solds) | $1,400,000 |
| 75% LTARV | $1,050,000 |
| 100% LTC on $1.42M vertical stack | $1,420,000 (LTARV binds first) |
| Loan in example | $1,050,000 (LTARV binds) |
| Sponsor equity + reserve beyond loan | ~$498,500 in example math |
Note: example compresses some soft lines for readability — sponsor had land equity and liquidity for LTARV gap before LOI. Files without gap cash do not start.
Challenge
Three failures common on Arizona luxury scrape files:
Arcadia comp import. Production tract $680K–$740K solds do not value Paradise Valley custom. ARV fantasy adds $100K–$150K until appraiser cuts.
Six-month IO reserve on seventeen-month build. Paradise Valley custom runs 15–18 months vertical plus 90-day jumbo buyer seasonality in shoulder season.
City vs town confusion. This lot was town of Paradise Valley — not city of Phoenix. Sponsor nearly modeled Phoenix impact fees from a wrong jurisdiction lookup.
Monsoon during framing. August storm hit before dry-in. $16,000 sponsor deductible — reserved, not borrowed.
Solution — 100% LTC available, 75% LTARV funded
Jaken Finance Group construction box in example: 8.99%–13.5% interest-only, 14 business days close on complete package. Funded $1,050,000 — the lower of LTC and LTARV, under the $2.5M program ceiling.
Draw gates
| Gate | Work | Notes |
|---|---|---|
| 1 | Demo, utilities, foundation | No finish front-load |
| 2 | Framing / dry-in | Monsoon claim processed before insulation |
| 3 | MEP rough | Town of Paradise Valley inspection sequence |
| 4 | Drywall / exterior | Pool shell parallel |
| 5 | Finish / CO | Staging line separate from draw |
Rate in carry model: 11% IO on rising balance. Change orders on millwork stayed inside 11% contingency.
Result — timeline in the example
| Milestone | Timing |
|---|---|
| Complete package in | Day 0 |
| Close / first draw | Day 14 |
| Foundation / Gate 1 | Week 9 |
| Dry-in / Gate 2 | Month 6 |
| CO | Month 17 |
| List | Month 18 |
| Contract | Month 20 |
| Close sale | Month 21 |
List price: $1,449,000 · Sale: $1,385,000 net of 8% costs → thin spread after $122K carry — margin was buying land $52K better and avoiding $135K ARV overstatement, not coupon heroics.
If DOM slipped past day 90, next step in file was luxury bridge — not a $100K price cut. Exit playbook: luxury spec home exit at 60–120 DOM.
Takeaway
Paradise Valley luxury scrape is a value-cap and submarket product that uses draws. Scottsdale-fenced comps, town permit path, monsoon reserve, and 17-month calendar beat a 7.75% teaser on the wrong machine.
Compare: volume flip vs jumbo construction · jumbo hard money over $1M.
New construction application · Submit scenario · (833) 264-7776
What the first term sheet got wrong
Shop A offered 90% LTC without Paradise Valley comps. Shop B was a six-month flip note. Neither matched scrape vertical. The example closed construction because plans, submarket comps, and reserve were complete — not because spread was effortless.
When this example does not apply
- $320K Phoenix ranch cosmetic — fix and flip
- Gut without demo on $750K+ ARV — luxury fix and flip
- Scottsdale STR condo — Scottsdale STR loans
- Owner-occupied primary residence
Comp mistakes — how Arcadia tract solds inflated ARV by $135,000
The sponsor’s first pro forma used three solds from Arcadia and south Phoenix production neighborhoods. On paper they looked close: similar square footage, recent close dates, and list prices in the $680,000–$740,000 range. The spreadsheet averaged them, added a $620/sf premium for Paradise Valley, and landed at $1,535,000 as-completed.
The listing agent and appraiser rejected every comp. Paradise Valley custom buyers do not shop Arcadia tract inventory. They compare Mummy Mountain, Lincoln Drive, and Cheney Drive corridors where lot sizes run 0.4–0.8 acres, setbacks differ, and finish levels include custom millwork, site walls, and pool packages that tract builders never deliver.
| Comp mistake | What the sponsor used | What underwriters accepted | ARV impact |
|---|---|---|---|
| Geography | Arcadia / south Phoenix tract | Paradise Valley + north Scottsdale custom only | −$85,000 |
| Finish level | Production-grade tract interior | Custom spec with designer package | −$32,000 |
| Lot utility | Smaller infill without views | View corridor + larger pad | −$18,000 |
| Total correction | $1,535,000 fantasy | $1,400,000 defensible | −$135,000 |
After correction, 75% LTARV dropped from a theoretical $1,151,000 to $1,050,000 — and the sponsor’s equity gap widened by $101,000 before vertical started. That is why Jaken Finance Group asks for submarket-fenced solds in the intake packet, not a radius search from Google Maps.
Rules that saved the file: fence comps to the same town or custom submarket; match above-grade sf within 15%; require two solds and one pending above $900,000; reject any comp with HOA tract architecture when the subject is custom scrape.
Draw schedule — milestone dollars, retainage, and inspection sequence
Construction funded $1,050,000 in five gates with 10% retainage held until certificate of occupancy. No finish materials were front-loaded. Each draw required GC invoice, lien waiver, and town inspection sign-off before wire.
| Gate | % of loan | Draw amount | Work completed | Retainage held | Cumulative drawn |
|---|---|---|---|---|---|
| Close / Gate 0 | 15% | $157,500 | Land equity credited; demo mobilization | $15,750 | $157,500 |
| Gate 1 | 20% | $210,000 | Demo, utilities, foundation pass | $21,000 | $367,500 |
| Gate 2 | 25% | $262,500 | Framing, roof dry-in, windows | $26,250 | $630,000 |
| Gate 3 | 20% | $210,000 | MEP rough, insulation, drywall hang | $21,000 | $840,000 |
| Gate 4 | 15% | $157,500 | Exterior, pool shell, cabinets | $15,750 | $997,500 |
| Gate 5 / CO | 5% | $52,500 | Finish, landscape, CO, staging | $5,250 | $1,050,000 |
| Retainage release | — | $105,000 | Final lien waiver + CO | Released at CO | $1,050,000 |
Average drawn balance for IO modeling was ~$525,000 through month 10, rising to ~$945,000 months 14–17. At 11% interest-only, monthly carry stepped from ~$4,800 early to ~$8,700 at peak — which is why a six-month IO reserve would have failed at month 14.
Monsoon damage at Gate 2 triggered a $16,000 sponsor deductible before insulation. The draw paused eleven days for dry-out and re-inspection — calendar slack lived in contingency, not a supplemental loan request.
Town of Paradise Valley inspections ran foundation → rough frame → MEP rough → insulation → final. Pool shell pulled in parallel at Gate 4 so landscape did not push CO past the 17-month model.
Extended timeline — pre-close through sale close
| Phase | Week / month | Event | Cash / loan event |
|---|---|---|---|
| Pre-close | Week −4 to 0 | Comp correction, plans, GC contract, LOI | Sponsor liquidity verified for LTARV gap |
| Close | Day 14 | First draw + interest reserve funded | $157,500 drawn; IO reserve $122,000 escrowed |
| Vertical | Month 1–6 | Demo through dry-in | Gates 1–2; balance rises |
| Vertical | Month 7–12 | MEP, drywall, exterior | Gates 3–4 |
| Vertical | Month 13–17 | Finish, pool, landscape | Gate 5; retainage held |
| CO + list | Month 18 | Certificate of occupancy; MLS live | Staging $18,000 from sponsor reserve |
| Marketing | Month 18–20 | Showings; one failed jumbo buyer | IO from reserve; no price cut yet |
| Contract | Month 20 | Accepted offer $1,385,000 | Bridge not needed |
| Sale close | Month 21 | Net after 8% costs | Construction payoff from proceeds |
If dry-in had slipped six weeks from monsoon repeat, CO would have hit month 18.5 — still inside the 21-month sale model but eating ~$26,000 extra IO. The sponsor held $75,000 contingency for exactly that.
Bridge exit math — if DOM slipped past day 90
The file modeled retail exit first. If DOM reached day 90 with no contract, the next step was luxury bridge while listed — not a $100,000 panic cut.
Bridge sizing in the example used appraised value $1,380,000 (list $1,449,000 with 5% showing cushion) and 65%–70% LTV on listed collateral:
| Line | Amount |
|---|---|
| Appraised value at day 90 | $1,380,000 |
| Bridge at 68% LTV | $938,400 |
| Construction payoff | $1,050,000 |
| Sponsor cash-in at bridge | ~$111,600 plus closing costs |
| Bridge rate (IO) | 10.25% example |
| Monthly IO on $938,400 | ~$8,018 |
| Target DOM extension | 90 days |
| Bridge IO cost (3 months) | ~$24,054 |
Bridge did not erase the LTARV equity gap — it bought time for the jumbo buyer pool without training the market on a headline slash. Payoff still came from sale proceeds. Jaken Finance Group sizes listed bridge on appraisal + DOM plan, not stale list price.
Compare bridge IO to a 10% price cut at day 45:
| Exit path | List / sale | Est. net (8% costs) | Spread vs $1.42M vertical stack |
|---|---|---|---|
| Hold list + bridge 90 days | $1,449,000 → $1,385,000 sale | ~$1,274,000 | Thin; bridge IO ~$24K |
| 10% cut at day 45 | $1,304,000 → faster sale | ~$1,200,000 | ~$220K spread gone |
| 4% cut at day 90 + bridge | $1,391,000 → $1,340,000 sale | ~$1,233,000 | Disciplined; preserves buyer psychology |
Price-cut cadence — what the listing plan said
Luxury specs punish panic. The agent and sponsor agreed in writing before CO:
| DOM window | Action | Rationale |
|---|---|---|
| Day 0–60 | Staging refresh, photography, broker open — no price change | Jumbo buyers need multiple visits; early cuts signal distress |
| Day 60–90 | Re-run Paradise Valley solds; if list-to-comp spread >7%, plan one 3%–4% reduction | Comps in this example supported $1,340,000–$1,380,000 at list |
| Day 90–120 | Second 3%–4% cut only if showings flat and fresh solds moved down | Two small cuts beat one 12% headline |
| Day 120+ | Bridge while listed or DSCR hold conversation | Retail seasonality, not coupon shopping |
In the example, no cut was needed — contract at month 20 with $64,000 list-to-sale delta (4.4%). The cadence still mattered because it stopped the sponsor from cutting $100,000 at day 50 when one buyer lost jumbo approval.
Full exit playbook: luxury spec home exit at 60–120 DOM.
DSCR fallback — if the jumbo buyer pool never showed
Business-purpose hold was the third lane. Paradise Valley custom can rent to corporate executive tenants at $8,500–$11,000/month — but DSCR sizes on documented rent, not STR fantasy.
| Input | Conservative | Aggressive (clean file) |
|---|---|---|
| Appraised value | $1,380,000 | $1,400,000 |
| LTV | 70% | 75% |
| Loan proceeds | $966,000 | $1,050,000 |
| Rate (amortizing) | 7.25% | 6.85% |
| Market rent | $9,200/month | $10,500/month |
| PITIA + reserve | ~$8,100/month | ~$8,900/month |
| DSCR | ~1.14 | ~1.18 |
Construction balance $1,050,000 at 75% LTV on $1,400,000 equals full payoff — zero cash-out. At 70% LTV, the sponsor needed ~$84,000 cash-in plus closing costs. The hold had to work on cash flow, not equity extraction.
That is why presale marketing and luxury bridge timing matter before pivoting to DSCR. Jaken Finance Group underwrites DSCR on rent roll or market rent comps in the same submarket — not a Zillow estimate from Arcadia.
Sponsor profile
Repeat operator with two prior Arizona flips and a GC who had delivered Paradise Valley custom — not first-file ranch experience applied to scrape.
Example deal math 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.