Deal snapshot
| Location | Southlake, Texas (Carroll ISD) — composite example |
|---|---|
| Property type | Custom SFR scrape (luxury spec) |
| Loan type | Ground-up construction — milestone draws |
| Loan amount | $1.26M (75% of $1.68M as-completed) |
| Close time | 14 business days from complete construction package |
Problem — land-heavy file, thin spread, wrong comps almost blew it
A repeat DFW operator controlled a 1984 brick ranch on a Southlake lot in Carroll ISD and ran two columns: $210,000 gut versus scrape and custom vertical. Gut math showed $690,000 all-in and $850,000 ARV — thin once Texas sale costs came out. Scrape math showed $1.35 million all-in and $1.68 million as-completed only after interior-lot Carroll comps replaced estate-lot imports.
The sponsor’s first lender quoted 90% LTC on a one-pager without reviewing value. Qualified luxury construction up to $2.5M can reach 100% LTC with Jaken Finance Group — but the value cap said 75% LTARV = $1.26 million on the corrected as-completed. Spread lives in ISD discipline and calendar, not a lower LTC ceiling on luxury.
Product pages: luxury new construction DFW · spec home construction Texas · Gut alternative: luxury fix and flip DFW.
Property snapshot
| Line | Amount |
|---|---|
| Land / existing structure acquisition | $420,000 |
| Demolition and site prep | $20,000 |
| Vertical hard (3,200 sf × $200/sf) | $640,000 |
| Pool, hardscape, landscape | $40,000 |
| Soft costs, plans, engineering | $35,000 |
| Permits, fees | $9,000 |
| Contingency (~8% of vertical hard) | $53,000 |
| Interest + marketing reserve | $133,000 |
| All-in | $1,350,000 |
| As-completed (Carroll ISD interior-lot custom solds) | $1,680,000 |
| 75% LTARV | $1,260,000 |
| 100% LTC on qualified file | $1,350,000 (LTARV binds first) |
| Loan in example | $1,260,000 (LTARV binds) |
| Sponsor equity beyond loan | $90,000 in example math |
Note: the sponsor brought the $90,000 gap at closing, against the land, before the first draw. Files without gap cash do not start.
Challenge
Four failures common on DFW luxury scrape files:
Wrong comp set. The first pro forma used two new-construction sales on estate lots, about $40/sf above interior-lot customs. On 3,200 sf that overstated ARV by roughly $120,000 until the appraiser cut it.
Six-month IO reserve on a sixteen-month build. Custom vertical on this plan ran 16 months, leaving about 60 days to market and close a buyer above $1.5 million inside an 18-month term.
Wrong-parcel tax lookup. The sponsor nearly modeled carry from a neighboring parcel’s tax record. Pull the certified tax statement for the exact account number.
Hail during framing. April storm hit before dry-in. $18,000 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, term inside the 12–18 month construction window. Funded $1,260,000 — the lower of LTC and LTARV.
Draw gates
| Gate | Work | Notes |
|---|---|---|
| 1 | Demo, utilities, foundation | No finish front-load |
| 2 | Framing / dry-in | Hail claim processed before insulation |
| 3 | MEP rough | City of Southlake 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 the ~8% contingency.
Result — timeline in the example
| Milestone | Timing |
|---|---|
| Complete package in | Day 0 |
| Close / first draw | Day 14 |
| Foundation / Gate 1 | Week 8 |
| Dry-in / Gate 2 | Month 5 |
| CO | Month 16 |
| List | Month 16 |
| Contract | Month 17 |
| Close sale | Month 18 |
List price: $1,725,000 · Sale: $1,655,000 · net of 8% costs about $1,522,600 → roughly $172,600 before tax on $1.35 million of cost. The margin came from buying land right and catching the $120K ARV overstatement before vertical, not from coupon heroics.
If the house had still been unsold at month 18, the next step in the file was a luxury bridge — not a $100K price cut.
Gut versus scrape, side by side
The sponsor’s first instinct was the cheaper gut. Here is how the two columns compared in the example, both with 8% sale costs:
| Line | Gut renovation | Scrape and build |
|---|---|---|
| All-in cost | $690,000 | $1,350,000 |
| Exit value | $850,000 | $1,655,000 sale |
| Sale costs (8%) | −$68,000 | −$132,400 |
| Profit before tax | ~$92,000 | ~$172,600 |
| Margin on cost | ~13.3% | ~12.8% |
| Calendar | ~8 months | ~18 months |
The margins were almost identical. The scrape earned more dollars but took more than twice as long and carried far more value risk. The sponsor chose it because the GC had built Carroll customs before and the land basis was strong. Without those two facts, the gut was the safer trade.
Documents behind the 14-day close
The close was fast because the package was complete on day zero. For a scrape file, that meant:
- Stamped plans and engineered foundation design with a soils report
- GC contract with a schedule of values that maps to the five draw gates
- Demolition permit path and utility disconnect sequence
- Builder’s risk policy naming the lender, with the wind and hail deductible stated
- Current survey and title commitment on the lot
- Comp set limited to same-ISD, similar-lot custom sales
- Proof of the $90,000 gap cash and the hail deductible reserve
Missing any one of these usually pushes a construction close past two weeks.
Takeaway
DFW luxury scrape is a value-cap and ISD product that uses draws. Carroll comps, a certified Tarrant tax statement, hail reserve, and a 16-month vertical calendar beat a 7.75% teaser on the wrong machine.
Compare: volume flip vs jumbo construction · Pod path: community build DFW.
New construction application · Submit scenario · (833) 264-7776
What the first term sheet got wrong
Shop A offered 90% LTC without Carroll comps. Shop B was a six-month flip note. Neither matched scrape vertical. The example closed construction because plans, ISD comps, and reserve were complete — not because spread was effortless.
How sensitive the deal was to value
Illustration: the same $1.35 million cost stack at three as-completed values. It assumes a sale at the as-completed value and 8% sale costs.
| As-completed value | 75% LTARV loan | Sponsor gap at closing | Profit before tax |
|---|---|---|---|
| $1,600,000 | $1,200,000 | $150,000 | ~$122,000 |
| $1,680,000 | $1,260,000 | $90,000 | ~$195,600 |
| $1,760,000 | $1,320,000 | $30,000 | ~$269,200 |
Every $80,000 of value moves the loan by $60,000 and profit by about $73,600. That is why the comp fight happened before the first draw. A sponsor who believed the $1.80 million number would have planned for zero gap cash and found out at the appraisal.
Property tax carry on a spec house
Spec homes held in an LLC do not get homestead treatment. Carroll ISD’s adopted 2026 total rate is $0.9269 per $100 of value, with a $140,000 homestead exemption for owner-occupants, per the Carroll ISD tax rate page. The district’s posted notice says the adopted rate will raise maintenance and operations taxes by about 7.45%, per the Carroll ISD home page.
Illustration of the school-district portion only:
| Taxable value | Carroll ISD tax at $0.9269 per $100 |
|---|---|
| $420,000 (lot and teardown) | ~$3,893 a year |
| $1,680,000 (completed home) | ~$15,572 a year |
City, county, and other taxing units add to those figures. If the house is still unsold when a new tax year’s value is set, the carry jumps. Pull the certified statement for the exact account and model both values in the reserve.
Texas retainage and the draw schedule
Texas law makes the owner hold back part of every construction payment. Under Texas Property Code § 53.101, the owner must reserve 10% of the contract price (or of the value of work done) while work is in progress and for 30 days after the work is completed.
That affects how the draw schedule reads:
- Your GC sees 90% of each gate. Build that into the contractor’s cash-flow expectations at signing, not at Gate 3.
- Retainage has to be paid at the end. Budget the final release so it does not collide with the interest reserve running low.
- Lien waivers travel with each draw. Collect conditional waivers from the GC and major subs before funds release.
Missed retainage can leave a subcontractor with lien rights against the property. Have Texas construction counsel review your contract form before the first draw.
Why countywide data misleads on luxury builds
Countywide numbers describe a different product. Realtor.com’s median listing price for all of Tarrant County was $369,900 in August 2026, per FRED series MEDLISPRI48439. The countywide median list price per square foot was $187, per FRED series MEDLISPRIPERSQUFEE48439.
This example’s as-completed value works out to about $525/sf. Neither number is wrong. They simply measure different houses. A lender, appraiser, or buyer’s agent will value a Southlake custom against Southlake customs on similar lots, inside the same ISD. Build your comp set the same way: same district, similar lot size, new or near-new construction, sold in the last 6 to 12 months.
Buyer financing and the exit
The end buyer for this house finances, so mortgage rates shape the exit. Freddie Mac’s 30-year fixed average was 7.28% for the week of October 1, 2026, up from 6.49% on June 25, 2026, per FRED’s PMMS series.
Illustration: a buyer putting 20% down on the $1,655,000 sale would borrow $1,324,000. At 6.50%, principal and interest is about $8,369 a month. At 7.28%, it is about $9,059 — roughly $690 more every month. That change can shrink the buyer pool by the time the house lists. Price the marketing reserve for a slower sale, and keep the luxury spec LTC calculator handy when you re-run the numbers.
When this example does not apply
- $280K Collin ranch cosmetic — fix and flip Texas
- Gut without demo on $750K+ ARV — luxury fix and flip DFW
- 10-cottage pod — community build DFW
- Austin compatibility scrape — luxury new construction Austin
- Owner-occupied primary residence
For eligibility detail on full-cost leverage, see luxury construction 100% LTC eligibility.
Sponsor profile
Repeat operator with three prior DFW flips and a GC who had delivered Carroll ISD custom — not first-file 100% LTC 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.