Durham rewrote its zoning to let builders put more homes on the lots it already has. Since the Expanding Housing Choices changes, many residential lots inside the urban core can take a duplex, a smaller lot split or an accessory dwelling, and investors are building where a single old house used to stand.
In short: LendingStreet finances ground-up construction in Durham for 1-8 unit investor projects: spec homes, build-to-rent houses, infill duplexes and fourplexes, and small 5-8 unit buildings. Loans are sized on loan-to-cost with terms set per project, and funds are released through a draw schedule after inspections. Plans, permits, a realistic budget and builder experience drive the approval.
Durham's Expanding Housing Choices amendments, adopted in 2019, allowed duplexes on many lots in the urban tier that were previously limited to one house, reduced minimum lot sizes in some districts and made accessory dwelling units easier to build. Later changes continued in the same direction.
For investors, that means a single lot in Old North Durham, East Durham or near Walltown can sometimes support two rental units instead of one. Confirm the exact rules for your lot with the Durham City-County Planning Department, since tier, district and overlay all matter, and infill standards can limit height, setbacks and design.
We finance residential projects of 1 to 8 units. Larger apartment projects fall under commercial lending.
| Project | Where it shows up | Typical exit |
|---|---|---|
| Infill duplex or two-unit build | Urban tier neighborhoods near downtown | Hold and refinance into DSCR, or sell |
| Spec single-family home | Teardown lots in close-in neighborhoods; North and South Durham lots | Sale to owner-occupant buyer |
| Build-to-rent homes | Suburban lots in Durham County and nearby towns | DSCR refinance or blanket loan |
| Small 5-8 unit building | Lots zoned for multi-unit residential | DSCR refinance on combined rent |
This example is illustrative and not a quote. An investor owns nothing yet and buys an East Durham lot for $120,000 to build a two-unit side-by-side duplex. Hard costs are budgeted at $430,000 and soft costs (plans, permits, utility connections, insurance and fees) at $50,000, for a total project cost of $600,000.
Assuming the project is sized at 80% of total cost, the loan is $480,000 and the investor contributes $120,000. Hard-cost funds are released in draws as work is inspected.
After completion, each unit rents for about $2,350, or $4,700 a month in total. If the duplex appraises at $760,000, a rate-and-term DSCR refinance of $490,000 pays off the construction loan and closing costs at about 64% LTV. With estimated principal and interest of about $3,343, $560 in taxes and $170 in insurance, the payment is about $4,073 and the DSCR is about 1.15x.
| Draw stage | Share of hard costs | Amount |
|---|---|---|
| Foundation and slab | 15% | $64,500 |
| Framing and roof | 25% | $107,500 |
| Rough-ins and dry-in | 20% | $86,000 |
| Drywall, cabinets, trim | 25% | $107,500 |
| Final and certificate of occupancy | 15% | $64,500 |
Construction approvals are about the project and the team. We look at whether the plans are complete, whether permits are issued or close, whether the budget matches the plans, and who is building it.
Projects without plans or permits, raw land with no clear entitlement path, and borrowers with no build history who are not working with an experienced general contractor usually do not qualify. Owner-builder projects for a home you will live in are not something we finance.
If you are early in the process, finish the site plan and get permit drawings underway first. A complete package gets a faster and clearer answer.
Lot splits and subdivision approvals deserve their own timeline. If your plan depends on dividing a lot or recording a new plat, finish that step before you ask for construction funding, since the loan is sized on a buildable, permitted project rather than on a plan that still needs approvals.
Older infill lots can need demolition, tree protection, stormwater measures or utility upgrades that never appear on a simple cost-per-square-foot estimate. Some Durham lots also sit near stream buffers or floodplain along Ellerbe and Third Fork creeks, which can shrink the buildable area.
Water and sewer connection fees and the cost of running new service to a second unit add up. Get those numbers from the city before you finalize your budget, and carry a contingency.
Durham's growth has also pushed up demand for skilled trades across the Triangle. Builders who lock in framing, electrical and plumbing subcontractors before closing tend to stay on schedule; those who line them up after the first draw often lose weeks.
When the build is finished and the certificate of occupancy is issued, investors who hold the property refinance into a DSCR loan that qualifies on the new rents. If you build several rentals, a blanket portfolio loan can combine them once they are leased.
Spec builders usually sell to owner-occupant buyers. Either way, map out the exit before the first draw so the finished project fits the loan that will replace the construction financing.
Spec builders in Durham are betting on resale demand from buyers who want new construction close to downtown, Duke or RTP. The finished price has to clear the cost of land, construction and carrying the loan, and a slow sale season can stretch interest costs. Build-to-rent investors are betting on rent instead, and their test is whether the finished rent supports a long-term DSCR payment after completion.
The same lot can work for either plan, but the loan request looks different. A spec request leans on comparable new-home sales; a build-to-rent request leans on comparable rents and on the DSCR math for the refinance. Tell us which exit you expect, and bring the numbers that support it.
Send the lot address, plans, budget, timeline and your build experience. Use the form below or call (877) 298-1001, and use our draw schedule calculator to plan how funds will flow.
On loan-to-cost: the total of land, hard costs and soft costs. Terms are set per project based on the plans, budget, location and builder experience.
On many lots in Durham's urban tier, yes, under the Expanding Housing Choices rules. Confirm your lot's district and any overlay with City-County Planning.
Funds for each stage are released after an inspection confirms the work is complete. You get paid for completed work, not in advance.
Permits issued or close to issued make approval much easier. Projects without plans or permits usually do not qualify.
Yes, for 1-8 unit projects. After completion you can refinance into a DSCR loan or, with several homes, a blanket portfolio loan.
Usually only with an experienced licensed general contractor and a complete package. Your track record affects leverage and terms.
No. Our investor loans are business-purpose loans on non-owner-occupied property.
A detached ADU on a lot you own can be part of a 1-8 unit investor project if it is permitted and the plans and budget are complete. Confirm the ADU rules for your lot with City-County Planning first.
2-3 competing quotes from 30+ capital sources. No credit pull. No commitment.
By clicking, you provide express written consent to be contacted by LendingStreet (NMLS #1734316) via SMS, phone, or email, possibly using automated technology, regarding your loan inquiry. Reply STOP to opt out. Consent is not required to obtain services. See our Privacy Policy and Terms.