Infill lot development financing is the loan for leftover dirt inside a street grid: a tired house you will scrape, a double lot you will split, or a vacant parcel that already has neighbors and comps. The work looks like construction. The risk looks like land until the demo permit and the as-completed story are real.
Jaken Finance Group funds qualified investor infill nationwide at 8.99%–13.5% interest-only. Land-only pieces — a scrape with no vertical yet, a split that is still one parcel — typically sit at 50%–65% of as-is value. Vertical on a legal lot is sized to the lower of cost and 75% of as-completed value. Close targets 10–14 business days when title, plans, and the exit are already in the file.
This is not vacant acreage waiting on a plat. It is not a luxury spec aimed at $900,000 to $2 million-plus. It is not a Chicago-only teardown study — that math lives in the Chicago infill teardown economics article. Use those pages when they match. Use this page when the job is a standard infill lot and a private construction stack.
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What counts as infill for this loan
Infill here means the lot already participates in a neighborhood:
- An existing house you will demolish and replace
- A vacant lot on a paved street with water and sewer in the right-of-way
- A lot split that creates one or two extra buildable parcels from a double-wide lot
- A leftover parcel after a street widening or a commercial scrape, if residential comps exist
It does not mean a 20-acre tract on the edge of town. That is A&D or subdivision financing. It does not mean a $1.6 million as-completed custom in a thin buyer pool. That is luxury new construction.
If you are building one house to sell or rent at certificate of occupancy, also read spec and build-to-rent financing and ground-up construction. Those pages price the vertical. This page prices the lot path that happens before the first foundation inspection.
Infill vs acreage vs luxury spec
| Standard infill | Raw acreage | Luxury spec | |
|---|---|---|---|
| Street and utilities | Already there, or a tap in the main | You are the street | Already there, expensive |
| Comps | Nearby sales in the same product | Future lots | Thin, high-end set |
| All-in (typical) | $350K–$850K | Land + horizontal first | $950K–$1.8M |
| Land leverage until vertical | 50%–65% as-is | 50%–65% as-is | Same land band, then 80%–88% cost on qualified luxury |
| Value cap on vertical | Lower of cost and 75% as-completed | Not a house yet | Same cap, binds more often |
| Demo / split | Often the whole file | Rare | Sometimes a scrape |
“Up to 100% of cost” on a small qualified spec still cannot exceed 75% of as-completed value. Infill files hit that ceiling when land is expensive relative to the house you can legally build.
Demolition as a loan line — not a surprise
Sponsors ask whether a construction loan can pay for demolition. On qualified files, yes. Demo is a budget line with four facts attached:
- Permit path. The city or county issues a demolition permit. Historic districts, conservation overlays, and some first-ring suburbs add a delay. The U.S. Environmental Protection Agency’s asbestos and demolition guidance is the federal floor; local rules are stricter. We do not fund a scrape that skips the survey.
- Contractor. A licensed demo contractor, not the GC’s cousin with a track hoe. Lien waivers on the demo draw.
- Hold period. The lot sits vacant. Taxes, insurance, and interest continue. If vertical is six months away, that is a land carry file for those months.
- As-completed comps. The house you will build must sell or rent in this block, not in a nicer block two miles away.
Demo without a rebuild plan is a land loan. We will not pretend a vacant lot is a construction file because you scheduled a dumpster.
Teardown cost budgeting. Demo, haul-off, well/septic abandonment, and utility caps are easy to understate. A small SFR scrape can run from the mid five figures to well over $100,000 when asbestos, a buried oil tank, or a shared driveway shows up. Put a contingency on demo the same way you put 10%–15% on hard cost. If the demo bid is “about $15,000” with no site visit, the file is not ready.
Lot splits, variances, and the paper that has to exist
A lot split is a survey and a recording, not a handshake. Until the new parcel exists, you have one lot of collateral. Leverage follows that fact.
A zoning variance or a setback relief is a hearing. Staff reports matter more than a council member’s text message. We want:
- The application as filed
- The hearing date
- The survey that matches the request
- A plan B if the variance fails (a smaller house, a hold, a sale of the existing lot)
Environmental assessments. Phase I is common when the lot had a commercial use, a dry cleaner nearby, or a heating-oil tank. Urban leftover parcels collect surprises: buried debris, old laterals, and shared laterals that the city will not let you tap without a replacement. Those are not “soft costs we will figure out.” They are conditions.
Urban utility surprises. Water and sewer in the street does not mean a cheap tap. Some cities charge capacity fees that rival the lot basis. Some mains are too shallow or too small for the new house. Get the will-serve or tap estimate before you ask for vertical leverage.
Two sequences we actually fund
Sequence A — scrape, then vertical. You close on the house-and-lot. Demo happens under a permit. The lot is vacant. Plans are already in permit or about to be. Vertical draws start after foundation is ready. One relationship can sequence both. The budgets still split: demo and hold at land-like caution, vertical at construction rules.
Sequence B — lot split, then one or two houses. You close on a double lot. The split records. Each new parcel can support its own vertical loan. We will not size two houses on one undivided parcel and call it efficient.
A stalled scrape — demo done, plans rejected, cash gone — is a mid-construction refinance only if remaining work and as-completed value still support a new stack. Otherwise it is a land sale.
Example: scrape-and-rebuild on a grid lot
| Line | Amount |
|---|---|
| Purchase (house + lot) | $185,000 |
| Demolition, haul-off, caps | $42,000 |
| Soft costs (plans, permits, taps, insurance) | $38,000 |
| Vertical hard cost | $310,000 |
| Contingency (12% of hard) | $37,000 |
| Interest reserve (10 months @ 10.5% on rising balance) | ~$28,000 |
| All-in | ~$640,000 |
| As-completed comps (same product, same grid) | $780,000 |
| 75% of as-completed | $585,000 |
| Lower of cost vs value cap | $585,000 binds |
The sponsor asked for “90% of cost” on $640,000 — $576,000 — and thought they were under the cap. They were, until the tap fee and a soil correction added $22,000. The cap does not move because the budget did. The file that works either cuts cost, finds better comps, or brings cash.
Interest-only at 8.99%–13.5% on the drawn balance. Term 12–18 months. Exit is a retail sale or a DSCR hold at 5.75%–10.5% when rent supports 70%–75% LTV on the finished house.
This example is a standard infill. If the as-completed target were $1.3 million with a 16-month build, stop and use luxury new construction.
What dies in underwriting
- No demolition path. Historic overlay, rental-registration hold, or a city that will not issue demo until a replacement permit exists — and you have neither.
- No as-completed comps in the same product. A two-story farmhouse comp set for a modern box, or suburban production comps for a 25-foot city lot.
- Historic or conservation overlay ignored. The delay is the file.
- Utility surprises left as a footnote. Capacity fees, shared laterals, alley access that is not legal access.
- Lot split still one parcel. Two-house leverage on one deed.
- Luxury economics stuffed into a standard box. Thin buyer pool, 12–18 month build, $900K+ finish — that is the other desk.
- Owner-occupied rebuild. We finance investment property only.
What “qualified” means on infill
A few flips in the same city help. A licensed GC who has pulled permits on that street helps more. Liquidity for taps, soil, and a slipped inspection is not optional.
First-time sponsors with a strong GC, a demo bid from a site visit, and comps that match the product can clear. First-time sponsors with a Zillow printout and a scrape “we will figure out” do not.
Credit is reviewed. Approval rides on the lot, the permit path, the budget, and the exit — not on a W-2 story.
Permits, neighbors, and the calendar nobody puts in the pro forma
Infill is a public process. Neighbors notice a scrape. Some cities require a replacement permit before demolition. Some require a fencing plan, a rodent report, or a tree survey. Those items are days and dollars. They are not “soft costs we will catch up.”
Ask the permit desk three questions before you send us a budget:
- Can I demolish before the replacement permit is issued? If no, your land carry is longer than the demo bid implies.
- What inspections sit between demo and foundation? Soil, compaction, and abandoned-line video are common. Each one can add a week.
- What fees are due at permit, not at CO? Tap and capacity fees at the front starve a thin reserve.
If the lot sits in a floodplain or a local historic inventory, stop and read the overlay. A variance that “should be easy” is still a hearing. We will wait for the staff report.
Insurance and vacant-lot carry
A vacant infill lot after demo is not an SFR insurance policy. Vacant-land liability, debris, and a hole in the ground are a different binder. Price it. A lapse between the old house policy and the course-of-construction policy is how files pick up a gap we cannot fund around.
Taxes sometimes reassess at demo. Ask the assessor how vacant land is treated on that street. A surprise tax bill in month four is a reserve problem, not a lender problem.
When infill should stay a flip
Not every tired house should be scraped. If as-completed comps for a new house do not clear 75% of a realistic all-in, a fix-and-flip or a heavy rehab may be the better loan. Infill financing is for the lot path and the new house. It is not a way to force a scrape that the block will not pay for.
Package to submit
- Purchase contract or deed, survey, and entity docs
- Demo bid and permit status (or the application)
- Plans, budget, and GC or builder resume
- Tap / will-serve or written fee estimate
- As-completed comps in the same product and grid
- Exit: sale timeline or rent roll for DSCR
- If a split or variance: application, hearing date, matching survey
For one-metro teardown math in Cook County, read Chicago infill teardown economics. For the construction starting point across products, use new construction loans for investors.
New construction application · Submit scenario · Get approved · (833) 264-7776
Infill 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.