An investment property provides a great potential for return on investments in the form of resale and profit or rental income over a period of time. However, when you are planning to build a new construction investment property, you need to factor in the new construction financing, the lender's requirements, and what you can expect through the process. The following provides you with some recommendations when planning for a new construction loan for an investment project.

Prepare For the Lending Requirements

When you are starting out in the process to obtain a new construction loan for an investment property, you will need to know what is going to be expected from the lenders to qualify for the loan. Just as you apply for a home loan, the lender of a construction loan will look at your personal qualifications and credit score. With an investment loan, they will want to review the project plans, how they are set up, and your investment company's credit. If you are doing business as a sole proprietor investor, you may need to provide your own credit score and income verification to qualify, as well as the investment project's income potential for the approval process.

To get a new construction loan, you will usually need to put down a down payment of at least twenty percent or more, depending on the size and cost of the project you are getting the loan for. Be prepared with a project construction plan that you can submit to your lender so they will have details of the project and a list of construction contractors who will be working on the construction. Your lender will want to make sure that their loan is going to be repaid by a viable investment and a finished project that has the finished value that is expected.

Look at Refinance Options

Once you qualify for the initial new construction loan, this will provide you the funds to start the construction process through a series of loan draws or disbursements to the construction contractors. But once the construction is complete on the project, the construction loan is no longer needed and you will need to refinance the loan into a residential or commercial property loan. 

This type of refinancing will roll over the balance of the construction loan and any financing you have existing on the land into one entire loan program, and can often be at a lower interest rate than the construction loan. This new financing will continue on over its life if you are going to rent out the property or you want to resell the property and put it up for sale and until you find a buyer for the property.

For more information on new construction financing for investors, contact a company like Triton Investors.