Birmingham combines low land costs in the city with strong suburbs over the mountain. For small builders, that means infill spec homes in revitalizing neighborhoods and new rentals in the growing suburbs.
In short: LendingStreet finances ground-up construction in Birmingham and the surrounding metro for investors building 1 to 8 units, including spec homes, build-to-rent homes, duplexes and small 5-8 unit buildings. Loans are sized on loan-to-cost with terms set per project, and funds are released through inspected draws. Hillside site work and storm-ready design are the local items to plan for.
Inside the city, investors build in Avondale, Crestwood, Woodlawn, Forest Park, Highland Park and areas near UAB, where demand from medical and university workers supports rentals and new homes sell against older housing stock.
In the suburbs, spec builders work in Trussville, Gardendale, Hoover, Helena and Chelsea, where schools drive buyer demand.
Birmingham's neighborhoods change block by block, so comparable sales and rents should come from the exact area, not the city average. In revitalizing neighborhoods, a new home may set a price record, and appraisers will look closely at whether recent sales support it. Build-to-rent investors should compare their planned rent with recent leases on newer homes nearby before committing to a floor plan.
Common Birmingham-area 1-8 unit projects: Each type has its own exit and its own local issues.
| Project type | Where it is common | Local note |
|---|---|---|
| Infill spec home | Crestwood, Avondale, Forest Park | Sale exit |
| Build-to-rent single-family | Gardendale, Fultondale, Bessemer | Rental exit into DSCR |
| Duplex or fourplex | Near UAB, Southside | Rental exit |
| Suburban spec | Trussville, Hoover, Chelsea | Compare to builder pricing |
The metro is split into many cities, each with its own permitting office, zoning and fees. Inside Birmingham, the city's planning, engineering and permits department handles plan review. Confirm the jurisdiction first, since rules differ between Birmingham, Hoover, Homewood and the others.
Alabama property taxes are low compared with most states, which helps the long-term rental math. Alabama charges recording taxes on deeds and mortgages, so include them in closing costs.
Sewer service in parts of Jefferson County runs through the county sewer system, and connection fees and capacity can differ from area to area. Some outlying lots use septic systems, which need soil testing and county health approval. Confirm the sewer path, and the cost to connect, before you buy a lot.
Red Mountain and the ridges around the city make many lots sloped or rocky, which adds grading, retaining walls and drainage. Central Alabama also sees tornadoes and severe storms, so roofing, connections and safe spaces are worth pricing.
Three things drive the loan: the total project cost, the loan-to-cost percentage set for your project, and the finished value. Terms are set per project after we review plans, budget, permits and the builder.
Your equity covers the gap between the loan and total cost. On Birmingham projects, soft costs and site work often run higher than investors expect, so a complete budget gives you a more accurate loan amount from the start.
This example is illustrative and not a quote. An investor builds a spec home in Crestwood to sell on completion. Land costs $60,000, hard costs are $330,000, soft costs are $35,000 and the contingency is $15,000, for a total project cost of $440,000.
At a sample 85% loan-to-cost, the loan is $374,000 and the investor puts $66,000 into the project. Most of the loan funds through draws as work is completed.
If the finished property sells for $510,000 in total and selling costs run about 6%, or $30,600, net proceeds of $479,400 repay the $374,000 loan and leave $105,400 before interest and carrying costs, against $66,000 of cash invested.
| Item | Amount |
|---|---|
| Land | $60,000 |
| Hard construction costs | $330,000 |
| Soft costs (plans, engineering, permits, fees) | $35,000 |
| Contingency | $15,000 |
| Total project cost | $440,000 |
| Loan at a sample 85% LTC | $374,000 |
| Investor cash in the project | $66,000 |
| Sale price | $510,000 |
| Selling costs at about 6% | $30,600 |
| Left after repaying the loan, before interest and carry | $105,400 |
Funds are released through a draw schedule, not in one lump sum. You finish a stage of work, request a draw, an inspector confirms the work in place, and the funds for that stage are released.
Build the schedule around how your Birmingham builder actually sequences the job. Our construction draw schedule calculator can help you map stages to dollars before you apply.
We look for investors with a buildable plan and the team to execute it. Experience can be your own or your general contractor's. Projects without plans or permits, or with no build track record and no experienced general contractor, usually do not qualify.
We also look at the land. Owning the lot, or having it under contract with a clear closing date, along with a survey and any soils work, makes the Birmingham file faster to review and the budget easier to confirm.
Decide the exit before you close. A sale exit should be supported by recent new-build sales nearby. A rental exit should be supported by local rents that can carry a DSCR loan at the 1.0x standard minimum, with sub-1.0 programs available in some cases.
If the finished property needs more time, a short-term bridge loan can sometimes fill the gap before the sale or long-term refinance.
Our investor loans are business-purpose loans on non-owner-occupied property. For your Birmingham project, share plans, budget and land details through the form below, or call (877) 298-1001.
Yes. We finance investor construction in Birmingham and suburbs like Hoover, Trussville and Gardendale, subject to plans, permits, budget and builder experience.
Alabama charges recording taxes on both deeds and mortgages. Ask your closing attorney or title company for the exact figures.
Not necessarily, but the site work has to be in the budget. Grading, retaining walls and drainage can add meaningful cost.
Yes. Once leased, it can refinance into a DSCR loan that qualifies on rent, with Alabama's relatively low property taxes helping the ratio.
No. Our investor loans are business-purpose loans on non-owner-occupied property.
In most cases, yes, or approved plans with a clear path to permit. Projects without plans or permits usually do not qualify.
Through a draw schedule. Each stage of work is inspected before funds for that stage are released.
Yes. Once the property is leased, a DSCR loan can pay off the construction loan, qualifying on rent with 30-year terms available.
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