Phoenix builders juggle water rules, caliche soils and summer heat. Smaller investors building one to eight rentals or spec homes need a lender that plans for all three.
In short: Our top pick for ground-up construction in metro Phoenix is LendingStreet. We finance residential investment projects of one to eight units, including build-to-rent homes, spec houses and infill casita projects. Loans are sized on loan-to-cost with terms set per project, funds are released on draws after inspections, and finished homes can refinance into 30-year DSCR rental loans. Because the Valley's moderate property taxes help the rental math, many builders here build to hold, and we test that exit before the first draw.
Metro Phoenix has a large, active build-to-rent market, and much of the work is done by smaller investors: three detached rentals on platted lots in the East Valley, a spec home on an infill lot near downtown, a casita and main house built together. LendingStreet finances ground-up construction on residential investment projects of one to eight units.
Each loan is sized on loan-to-cost, with terms set for the project. Funds are released through a draw schedule after inspections, and once the homes are finished and leased you can refinance into a 30-year DSCR rental loan or sell. Plans, permits, the budget and the builder's experience drive the review.
Ready to price a Valley project? Get a quote with the form below or call (877) 298-1001.
Banks, private lenders and LendingStreet each fit different builders. A bank may suit a large production builder with years of statements; a private lender can move on a land deal. For investor projects of one to eight units, the comparison usually looks like this.
| What Valley builders need | LendingStreet | Typical bank | Typical private or hard money lender |
|---|---|---|---|
| Project fit | Spec, build-to-rent, infill 1-8 units | Often larger or repeat builders | Varies |
| Sizing method | Loan-to-cost, per project | Often lower leverage | Varies; fees and terms vary |
| Funding | Draws after inspections | Draws after inspections | Varies |
| When the homes are done | DSCR refinance available | Separate permanent loan | Usually short-term only |
| Entity borrowing | LLC is standard | Common | Common |
| Focus of review | Plans, permits, budget, builder | Often financial statements | Mostly the deal |
Build-to-rent and spec homes on finished lots are common in the West Valley, including Buckeye, Goodyear, Surprise and Peoria, and in the East Valley in Mesa, Queen Creek and San Tan Valley. Infill builders work older neighborhoods in central and south Phoenix, Tempe and west Mesa, where lots with alley access can sometimes fit a main house and a casita.
Each city has its own planning and building department, so a project in Gilbert follows different rules than one in Glendale or unincorporated Maricopa County. Arizona now requires larger cities to allow accessory dwelling units, which has opened up more two-unit infill.
In the Phoenix area, new subdivisions must show an assured 100-year water supply, and state limits on new groundwater-based certificates have changed where large subdivisions can be approved. Infill lots and lots in existing subdivisions served by a city water provider usually avoid that issue, but confirm water service before you buy land.
Many lots have caliche or expansive soils, so a soils report and the right foundation design matter. Summer heat shifts concrete pours and much outdoor work to early morning, which can stretch the schedule. Arizona also taxes prime contracting under its transaction privilege tax, so ask your builder how that is reflected in the bid.
This example is illustrative and not a quote. An investor buys 3 platted lots for $110,000 each, or $330,000, and plans three 1,800-square-foot single-family rentals. Hard costs are $165 a square foot, or $891,000 for all three, and soft costs for plans, permits, impact fees, utility connections and insurance are $90,000. Total cost is $1,311,000.
If the project were sized at 80% of cost, an assumption for illustration since terms are set per project, the construction loan would be $1,048,800 and the investor's equity $262,200.
Each finished home is valued at $540,000 and leases for $2,750 a month, with taxes of $200 and insurance of $115. A DSCR loan at 65% of value is $351,000 per home, with estimated principal and interest of about $2,394 and DSCR of about 1.01x. Three such loans total $1,053,000, enough to pay off the construction loan. At 70% of value, DSCR would fall to about 0.95x, below the 1.0x standard.
| Item | Per home | Three homes |
|---|---|---|
| Lot | $110,000 | $330,000 |
| Hard costs | $297,000 | $891,000 |
| Soft costs | $30,000 | $90,000 |
| Total cost | $437,000 | $1,311,000 |
| Illustrative construction loan at 80% of cost | $349,600 | $1,048,800 |
| DSCR refinance at 65% of value | $351,000 | $1,053,000 |
| DSCR per home | About 1.01x | About 1.01x |
Once the homes have certificates of occupancy and signed leases, each can refinance into a 30-year DSCR loan that qualifies on its rent, with no W-2s or tax returns. If you build five or more, a blanket portfolio loan can put them under one closing and one payment.
Arizona property taxes are moderate, which helps the rental math compared with many Sun Belt states. Insurance is usually modest for new construction, though monsoon wind coverage is worth checking.
Funds release in stages after an inspector confirms the work: foundation, framing, rough-ins, drywall and finishes. On a multi-home project, a clear budget for each home keeps draws simple. Our construction draw schedule calculator can help you map the stages before you apply.
Compare lenders on the same list. Here is how LendingStreet answers.
Projects without plans or permits, or a borrower with no build track record and no experienced general contractor, usually do not qualify. Have these ready.
Our top pick is LendingStreet. We finance one- to eight-unit spec, build-to-rent and infill projects across the Valley, sized on loan-to-cost, with inspected draws and a path into 30-year DSCR loans when the homes are leased.
Yes. We finance construction across metro Phoenix and Maricopa and Pinal counties, and we lend in all 50 states and DC.
Yes. Build-to-rent projects of one to eight units are a core fit, and finished homes can refinance into DSCR loans.
They mainly affect new subdivisions. Lots served by an existing city water provider usually avoid the issue, but confirm water service first.
Often, yes, where the city allows accessory units. Include both in your plans and budget.
After each stage is inspected and confirmed, the draw for that stage is released.
If you own five or more rentals, a blanket portfolio loan can combine them under one closing and payment.
Without your own build track record, an experienced general contractor is generally required.
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