A condo construction loan funds the building that will be sold or held as condominium units — a new stacked product, or a conversion that still needs a declaration, an association, and a certificate of occupancy. Banks stall on HOA paper. End buyers stall on warrantability. The construction stack has to finish anyway.
Jaken Finance Group funds qualified investor condo construction nationwide at 8.99%–13.5% interest-only. Leverage is the lower of cost and 75% of as-completed value from unit comps, not house comps next door. Close targets 10–14 business days when plans, title, and the association path are already in the file. Stabilized rent on retained units can exit to DSCR at 5.75%–10.5%.
This is not buying one resale condo to paint. That is a fix-and-flip or a rental purchase. It is not condo deconversion in Chicago, which takes units out of an association. It is not a condotel DSCR hold on nightly inventory. Use those when they match. Use this loan when you are creating condominium units.
Apply for a condo stack: new construction · submit a scenario · (833) 264-7776
What counts as condo construction here
Condo construction on this desk means you will deliver separately deeded units with common elements:
- A new low-rise or mid-stack building recorded as condominium
- A conversion of a walk-up, two-flat, or small apartment into recorded units
- A small attached product sold as condos rather than as a single rental building
It does not mean a single townhome with no association. That is townhome construction. It does not mean a 16-unit rental you will never divide. That is multifamily construction or small multifamily construction. It does not mean a $1.6 million custom spec aimed at one buyer. That is luxury new construction.
If the lot is a scrape with no vertical yet, start with infill lot financing and come back here when the product is actually condos.
Condo vs spec house vs rental multifamily
| Condo construction | One spec house | Rental multifamily | |
|---|---|---|---|
| Deeds at exit | Many units | One house | One building |
| Association | Required | Rare | Owner, not HOA |
| Comps | Sold units, same finish | House sales | Rent roll and building sales |
| Takeout | Unit sales, bulk, or DSCR on retained units | Retail sale or DSCR | DSCR or community bank |
| Extra paper | Declaration, budget, insurance master | House plans | Rent comps, lease-up |
A sponsor who underwrites six new condos with three nearby house sales will miss the file. Unit finish, HOA dues, parking assignments, and rental rules move value more than curb appeal.
HOA formation is a construction line, not a closing surprise
Ground-up and conversion both need an association that can collect dues, insure common elements, and (if you sell) survive a buyer’s lender questionnaire.
We want, before the first vertical draw if you claim a unit-sale exit:
- A formation timeline. Counsel named. Draft declaration or a dated start. Not “we will form the HOA when the drywall is up.”
- A first-year budget. Insurance, reserves, utilities on common elements, management. Dues that make the unit unsalable are a value problem.
- Insurance path. A master policy at CO is not an SFR binder times eight. Price it.
- Rental rules. If your exit is hold, the documents must allow investor rentals at the ratio you plan. A 30% rental cap with 28% already spoken for is a failed hold.
Conversion files add existing-owner notices, local conversion ordinances, and sometimes a tenant-purchase window. DC conversions have their own checklist. Chicago deconversion is the opposite trade. Do not mix those packets.
Fannie Mae’s condo project review is the warrantability language end-buyer lenders use. We are not an agency condo desk. We still care whether your buyers can get loans. A project that only cash buyers can purchase is a slower sell-out.
Two exits we will actually underwrite
Unit sales. You sell finished units to end buyers or small investors. Absorption has to match the building, not a 200-unit tower two miles away. A six-unit conversion that needs 14 months to sell four remaining doors is a carry file. Budget interest through that calendar.
Hold some or all. You keep units as rentals. Takeout is DSCR when leases and HOA dues still leave ratio. Model dues as an expense. Model vacancy. Do not treat HOA as optional.
Bulk sale to one operator is a third exit. It needs a buyer type, not a hope. A bulk discount against retail unit pricing is normal. If the file only works at full retail on every door, say so and expect a pass when one unit sits.
A stalled frame with no declaration is mid-construction refinance only if remaining work and as-completed unit value still support a new stack.
Example: six-unit conversion to recorded condos
| Line | Amount |
|---|---|
| Purchase (occupied 6-flat, tired) | $890,000 |
| Conversion hard cost (kitchens, baths, systems, demising) | $420,000 |
| Soft cost (plans, permits, legal, HOA formation, insurance) | $95,000 |
| Contingency (12% of hard) | $50,000 |
| Interest reserve (14 months on rising balance @ ~10.5%) | ~$95,000 |
| All-in | ~$1.55M |
| As-completed unit comps (6 × $295,000) | $1.77M |
| 75% of as-completed | ~$1.33M |
| Lower of cost vs value cap | $1.33M binds |
The sponsor asked for 90% of cost — about $1.40M — and treated HOA legal as a footnote. The value cap binds first. Dues at $285 per unit per month also shaved the hold DSCR on the two units they wanted to keep. The file that works either cuts cost, finds better unit comps, or brings cash.
Interest-only at 8.99%–13.5% on the drawn balance. Term 12–18 months. Unit-sale exit on four doors. DSCR on two retained units at 5.75%–10.5% only after leases and a master policy exist.
This example is a conversion. A new six-unit stack on an infill pad uses the same caps and a different hard-cost line. If as-completed unit values target $550,000 each in a thin buyer pool, stop and talk luxury or a smaller finish.
What dies in underwriting
- No association path. “We will form it later” on a unit-sale story.
- House comps for unit collateral. A bungalow sale does not value a 900-square-foot stacked condo.
- Rental cap vs hold story. Documents block the exit you described.
- Special assessment ignored on a conversion — roof, facade, or litigation sitting in minutes.
- Parking math. Assigned spaces that do not exist, or tandem spots the market will not pay for.
- Warrantability treated as optional when every end buyer needs a mortgage.
- Owner-occupy one unit. We finance investment property only. Living in unit 2 while you sell unit 3 is the wrong lender.
Permits, declarations, and the calendar that is not in the GC bid
Cities issue building permits. Associations get recorded at the recorder. Those clocks are not the same.
Ask three questions before you send a budget:
- When can the declaration record relative to CO? Some jurisdictions want substantial completion. Some want it earlier for presales. The answer changes carry.
- Do conversion ordinances require notices or a hearing? If yes, that month is interest, not “soft cost we will catch up.”
- Will the fire, elevator, or accessibility upgrade show up at inspection? Conversions hide wet stacks and missing rated assemblies. Budget the discovery.
If the building sits in a historic overlay, the facade is a permit item. We will wait for the staff report. We will not max leverage on a “they always approve these.”
Insurance, dues, and takeout math
Course-of-construction insurance covers the build. The master policy at CO covers common elements and often the unit shells. Get both quotes. A file that uses an SFR premium times six will fail when the real binder arrives.
HOA dues are an expense on every hold unit and a buyer objection on every sale unit. Underwrite them. A $410 monthly due on a $1,850 rent is a DSCR problem, not a surprise.
Construction takeout on retained units often lands closer to 70%–75% of stabilized value, not an 85% purchase slogan. Model the permanent payment before you pour. Interest-only construction carry is not the takeout payment.
For Chicago-specific conversion and deconversion mechanics, read Chicago condo deconversion financing and the Chicago bulk-buyout guide. For DC row conversions, use the DC condo conversion financing checklist. Those pages add ordinance texture. They do not replace a national construction stack.
What “qualified” means on condo construction
A GC who has delivered this product in this city helps more than a resume of SFR flips. Liquidity for a slipped inspection, a special assessment discovery, or a slow first closing is not optional.
First-time sponsors with sealed plans, a named association attorney, unit comps, and cash can clear. First-time sponsors with a rendering and “HOA TBD” do not.
Credit is reviewed. Approval rides on cost, unit value, the association path, and the exit — not on a W-2 story.
Presales, deposits, and what they are worth
A reservation list is not a contract. A 5% deposit in escrow with a right to walk is not the same as a hard contract. We like evidence of demand. We will not size the loan as if six units are already sold because a broker forwarded emails.
If your state requires a public offering statement before you take deposits, put that date on the calendar. Selling units you are not allowed to sell yet is how files pick up counsel we cannot fund around.
Buyer financing, FHA concentration, and cash-only risk
A construction loan can finish a beautiful six-unit stack that no end buyer can finance. That is still a failed exit.
Concentration. Some unit lenders cap how many investor-owned doors they will accept in a small project. If you plan to hold two and sell four, the four buyers’ lenders will count your two holds as investor concentration. Ask that question before you pour.
FHA and high-rise rules do not apply to every small conversion, and they still leak into buyer conversations. If your sell-out assumes FHA end buyers on $250,000 units, verify that this project type is even eligible. If it is not, your buyer pool is conventional, DSCR, or cash. Price absorption accordingly.
Litigation and insurance history on a conversion will show up on questionnaires. Minutes that mention a facade lawsuit are not “old news.” They are a sale delay. Budget counsel and a reserve contribution if the association will be born in a hole.
A sponsor who cannot explain how the first three buyers get mortgages is not ready for a unit-sale construction stack. They may still be ready for a hold. Say which one.
GC bids that look like house bids
Condo and conversion files die when the bid is an SFR remodel with “times six” written in the margin.
We want line items for demising walls, rated assemblies, common corridors, a master meter or unit meters, and common-element finish. A kitchen allowance with no common-area line is incomplete. A GC who has never delivered a condominium inspection sequence will miss fire-stopping and then eat your contingency.
If two bids differ by 25% on hard cost, do not pick the cheap one and send it as truth. Explain the gap. We will underwrite the number we believe, not the number that makes leverage look pretty.
Package to submit
- Purchase contract or deed, survey, and entity docs
- Plans, specs, line-item budget, and GC bid
- Conversion ordinance notes or new-construction permit status
- Draft declaration, budget, and insurance quotes — or a dated formation plan
- Unit comps (sold, same product, similar size and dues)
- Exit: sell-out calendar, bulk buyer, or rent roll for DSCR
- If the job is already started: photos, remaining bid, current loan terms — use mid-construction refinance when the original lender is done
Starting point across construction products: new construction loans for investors. Attached product without a condo declaration: townhome construction loans.
Apply for condo vertical with plans, the association path, and unit comps: new construction application. Still choosing conversion vs ground-up vs a stalled frame? Submit a scenario or get approved. (833) 264-7776
Condo construction 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.