In Chicago, new construction means one 25-foot lot at a time: a teardown becomes a spec home, a two-flat or a three-flat. The lender has to understand both the build and the exit.
In short: Our top pick for ground-up construction in Chicago is LendingStreet. We finance residential investment projects of one to eight units, from spec single-family homes to new two-flats and three-flats. Loans are sized on loan-to-cost with terms set per project, funds are released on draws after inspections, and finished buildings can be sold or refinanced into a 30-year DSCR loan. We pay close attention to the Chicago details that shape a project: permits, zoning, winter building and high Cook County property taxes.
Chicago's new residential construction happens one lot at a time. A builder buys a worn-out frame cottage on a standard 25-by-125 lot, tears it down and puts up a new single-family home, a two-flat or a three-flat. LendingStreet finances ground-up projects of one to eight residential units for investors, which covers most of the infill work done in the city and close-in suburbs.
Loans are sized on loan-to-cost, with terms set per project. Money is released on a draw schedule after inspections confirm each stage, and the finished project can be sold or refinanced into a long-term DSCR loan if you plan to hold it. Plans, permits, budget and builder experience carry the most weight.
If your Chicago project is ready to move, get a quote with the form below or call (877) 298-1001.
Here is how the main options usually compare for an investor building one to eight units. A relationship bank can fit an established builder with strong financials, and a private lender can be useful for a short land hold.
| What Chicago builders need | LendingStreet | Typical bank | Typical private lender |
|---|---|---|---|
| Projects financed | Spec, build-to-rent, infill 1-8 units | Often prefers repeat builders | Varies |
| How the loan is sized | Loan-to-cost, per project | Often lower leverage | Varies; fees and terms vary |
| Releasing funds | Draws after inspections | Draws after inspections | Varies |
| Long-term option | Refinance into a DSCR loan | Separate permanent loan | Usually short-term only |
| LLC borrowing | Standard | Common | Common |
| What gets reviewed | Plans, permits, budget, builder | Often personal and business financials | Mostly the deal |
Spec single-family homes are common in Roscoe Village, North Center, Lincoln Square, Ravenswood, Bucktown and parts of Logan Square, where buyers pay for new construction on standard city lots. Two-flats and three-flats get built in Avondale, Irving Park, Bridgeport, McKinley Park and Pilsen, where zoning allows more than one unit.
In the suburbs, teardown-and-rebuild spec work is common in places like Park Ridge, Elmhurst, Hinsdale, Wilmette and Glenview, while Oak Park and Evanston see occasional infill. Each suburb has its own building department, zoning code and review timeline.
The Department of Buildings issues permits, either through standard plan review or, for qualifying projects, a self-certification path run by licensed architects. If a project needs a zoning change or variance, the local alderman's support often matters, so budget extra time.
Some neighborhoods carry added costs. Areas near the 606 trail and in Pilsen have demolition fees designed to slow teardowns, and the city's rules on accessory dwelling units have been limited to designated areas; confirm current boundaries before you plan a coach house.
Winter is a real factor. Foundations and masonry poured in cold weather need heating and protection, which adds cost and time. Cook County property taxes are high, and city, county and state transfer taxes apply at sale, so build them into both the budget and the exit.
This example is illustrative and not a quote. A builder buys a teardown on a 25-by-125 lot for $425,000 and plans a 3,800-square-foot single-family home. Hard costs are budgeted at $300 a square foot, or $1,140,000, and soft costs for architecture, permits, demolition, utility work and insurance are $135,000. Total cost is $1,700,000.
Assuming, for illustration only, that the project were sized at 80% of total cost, the loan would be $1,360,000 and the builder would put in $340,000. Leverage is set per project.
If the finished home sells for $2,150,000 and selling costs, including commission, transfer taxes and closing costs, are assumed at 6%, or $129,000, net proceeds are $2,021,000. That leaves a gross margin of about $321,000 before financing costs.
| Line item | Amount |
|---|---|
| Lot | $425,000 |
| Hard costs | $1,140,000 |
| Soft costs | $135,000 |
| Total project cost | $1,700,000 |
| Illustrative loan at 80% of cost | $1,360,000 |
| Builder equity | $340,000 |
| Sale price | $2,150,000 |
| Selling costs at 6% | $129,000 |
| Gross margin before financing costs | $321,000 |
Holding a new single-family home as a rental is harder in Chicago because of the tax bill. If the same home rented for $7,900 a month, with taxes of $3,300 and insurance of $325, refinancing the full $1,360,000 balance would mean estimated principal and interest of about $9,278 and a DSCR of only about 0.61x.
Two-flats and three-flats are different. Two or three rents on one lot and one tax bill often make the hold math work, which is why many build-to-rent investors in the city build multi-unit buildings and refinance into a DSCR loan once they are leased.
Each draw follows an inspection that confirms the work in that stage: foundation, framing, rough-ins, drywall and finishes. A detailed budget with a contingency line keeps draws moving, especially when weather delays shift the schedule.
Use our construction draw schedule calculator to plan your stages, and match your general contractor's payment terms to it before you close.
Ask each lender these questions and compare them in writing.
Projects without plans or permits, or a borrower with no build track record and no experienced general contractor, usually do not qualify. A strong file has these items ready.
Our top pick is LendingStreet. We finance one- to eight-unit spec homes, two-flats, three-flats and build-to-rent projects sized on loan-to-cost, with draws after inspections and a path into a 30-year DSCR loan.
Yes. We finance construction in Chicago and across Cook, DuPage, Lake and the collar counties, and we lend in all 50 states and DC.
Yes. New two-flats and three-flats are one- to eight-unit residential projects, and they can refinance into a DSCR loan once leased.
Yes, but cold-weather concrete and masonry add cost and time. Build that into your budget and schedule.
Some neighborhoods, including areas near the 606 trail and Pilsen, carry demolition fees. Check with the city before you buy a teardown.
Each stage is inspected, and the draw for that stage is released once the work is confirmed.
If you do not have your own build track record, an experienced general contractor is generally required.
A coach house can be part of a one- to eight-unit project where the city allows accessory units. Confirm the lot is in an eligible area.
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