Redstone Arsenal, NASA's Marshall Space Flight Center, Cummings Research Park and a large auto plant in Limestone County have made Huntsville one of the fastest-growing metros in the Southeast. Builders have been racing to keep up.
In short: LendingStreet finances ground-up construction of 1-8 unit investment property in Huntsville, Madison, Harvest, Meridianville, Hazel Green, Athens and the rest of Madison and Limestone counties. Loans are sized on loan-to-cost, funded in inspected draws and priced per project. Spec homes, build-to-rent houses and duplexes for engineers, defense contractors and plant workers are the most common projects.
West of the city, Madison and the area toward Limestone County have strong schools and many newer subdivisions, close to Redstone's gates and the research park. Athens, Mooresville and the Greenbrier area are closer to the Mazda Toyota plant along I-65 and have been adding housing quickly.
North of Huntsville, Harvest, Meridianville and Hazel Green have more land and lower lot prices. Hampton Cove and Owens Cross Roads to the southeast offer larger lots. Inside the city, Blossomwood, Twickenham, Old Town and the MidCity area see infill and teardown activity at higher price levels.
Each of these areas has its own school district and, in some cases, city limits that cross county lines, which affects both rent and tax.
| Area | Common build | Consideration |
|---|---|---|
| Madison, west Huntsville | Spec and build-to-rent homes | Lot prices and school demand |
| Athens, Greenbrier, Mooresville | Rentals near the auto plant | Utility capacity, county rules |
| Harvest, Meridianville, Hazel Green | Entry-level spec and rentals | Supply from other builders |
| Blossomwood, Twickenham, MidCity | Infill and teardowns | Land cost, historic review |
Engineers, defense contractors and federal employees at Redstone and the research park make up a large share of the market. Many arrive on new contracts and rent for a year or two before buying, and they prefer newer homes with offices and garages.
The Limestone County auto plant and its suppliers add production workers who often rent duplexes and smaller homes. The planned move of U.S. Space Command's headquarters to Redstone is expected to add further demand over time.
Spec builders sell to the same buyers, and a spec home that does not sell quickly can usually be leased and refinanced instead.
A ground-up loan is sized on loan-to-cost (LTC): the share of land, hard costs and soft costs the loan covers. Terms are set per project, so a Huntsville build with clean plans, a firm budget and an experienced builder is priced on its own merits.
Construction money is not handed over at closing. It is released through a draw schedule: the builder finishes a stage, an inspector confirms the work, and the next draw funds. Lining up your budget with the draw schedule before you close keeps subcontractors paid on time.
Huntsville, Madison, Athens and Madison and Limestone counties each handle permits for their own areas. Unincorporated lots may rely on county inspections and septic approval from the health department.
Alabama requires residential builders to be licensed by the state Home Builders Licensure Board for projects above a cost threshold. Confirm your builder's license before you apply.
Fast growth has strained roads, schools and sewer capacity in some areas, and a few jurisdictions have slowed new subdivision approvals. Ask about capacity before you buy land.
Alabama property taxes are among the lowest in the country, but rental property is assessed at a 20% assessment ratio, double the 10% ratio for an owner-occupied home. The finished rental will be taxed at the higher class.
Alabama charges a deed tax and a mortgage recording tax. Your title company can estimate both for the land purchase, the construction loan and the later refinance.
Plans, permits, the budget and builder experience carry the most weight in a Huntsville file. A borrower with no build history can still qualify when an experienced general contractor runs the job. Projects without plans or permits, or a first-timer acting as their own GC, usually do not qualify.
We finance 1-8 unit investment property only; nothing here is for a home you plan to live in. Larger apartment projects are handled as commercial loans.
This example is illustrative and not a quote. A builder puts up a four-bedroom house on a subdivision lot near Redstone, planning to sell but able to lease and refinance if needed. Land costs $75,000, hard construction costs $300,000 and soft costs $25,000, for a total project cost of $400,000. For illustration the loan covers 85% of cost, or $340,000, and the investor brings $60,000 plus closing costs; actual LTC is set per project.
Finished, the property appraises at $460,000 and leases for $2,850 a month. A DSCR refinance at 75% of value is $345,000, enough to repay the construction loan. Estimated principal and interest is about $2,354, taxes about $260 and insurance about $150, for a payment near $2,764 and a DSCR of about 1.03x.
Sold instead at $460,000, the builder would repay the construction loan from the proceeds and keep the remainder after selling costs and interest carry.
| Item | Amount |
|---|---|
| Land | $75,000 |
| Hard costs | $300,000 |
| Soft costs | $25,000 |
| Total project cost | $400,000 |
| Construction loan (85% of cost, illustrative) | $340,000 |
| Investor cash before closing costs | $60,000 |
| Completed value | $460,000 |
| DSCR refinance (75% of value) | $345,000 |
| Monthly rent | $2,850 |
| Estimated principal and interest | $2,354 |
| Taxes and insurance | $410 |
| Estimated DSCR | About 1.03x |
In Madison and Hampton Cove, spec homes usually sell to owner-occupants. In Harvest, Athens and other fast-building areas, investors often hold and refinance into a DSCR loan once leased.
Watch supply. Many builders are active in the same subdivisions, so pricing and rent comps can shift quickly. Low property taxes help the DSCR math on a held rental.
Because Alabama taxes stay low even at the rental assessment ratio, the tax line on a held Huntsville rental is usually much smaller than on a comparable Texas or Midwest property, which leaves more of the rent to cover principal and interest.
To get a quote on a Huntsville project, share the basics on the form below or call (877) 298-1001. We review the plans, budget and builder, then send terms with the LTC, the draw schedule and the expected exit.
Yes, for builders with plans, permits, a budget and experience. Spec homes are a common project here.
At a 20% assessment ratio, compared with 10% for owner-occupied homes, times the local millage.
No. Our investor loans are business-purpose loans on non-owner-occupied property.
Residential builders generally must be licensed by the Home Builders Licensure Board above a cost threshold. Confirm before applying.
Yes, including Athens and areas near the auto plant.
Possibly, when an experienced general contractor is on the project and plans and permits are in place.
On loan-to-cost. We add up land, construction and soft costs and lend a share of that total, set for the specific project.
Our Alabama construction loans page covers the state.
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