Building in Knoxville means building on hills. Infill lots in South and North Knoxville are often steep, rocky or both, and the first stage of the budget, getting a level, drained foundation in place, is where many first-time projects go over.
In short: LendingStreet finances ground-up construction of 1-8 unit investor properties in Knoxville and East Tennessee, including spec homes, build-to-rent homes, infill duplexes and fourplexes, and small 5-8 unit buildings. Loans are sized on loan-to-cost, terms are set per project, and funds are released through a draw schedule after inspections. Plans, permits, a realistic budget and builder experience drive approval.
Population growth has created demand for new homes across the metro, from infill near downtown to new subdivisions on the edges.
Growth in western Knox County and Loudon County has pushed production builders into Hardin Valley, Lenoir City and nearby areas. Smaller investor builders often do better on infill lots closer to downtown, where production builders rarely compete.
| Project | Where | Typical exit |
|---|---|---|
| Infill spec home | South Knoxville, North Knoxville, Fountain City | Sale to buyers wanting new near downtown |
| Build-to-rent home or duplex | Older city neighborhoods and inner suburbs | DSCR refinance on rent |
| Suburban spec home | Hardin Valley, Powell, Halls, Maryville | Sale to families |
| Small 5-8 unit building | Zoned parcels near UT and downtown | DSCR refinance; max LTV varies |
This example is illustrative and not a quote. An investor buys a sloped infill lot for $78,000 and plans a three-bedroom home with $372,000 of hard costs, including excavation and a retaining wall, and $41,000 of soft costs for plans, engineering, permits, utility taps and insurance. Total cost is $491,000.
At 80% of cost the loan is $392,800, and the investor brings about $98,200. Interest accrues only on funds drawn, and each draw is released after an inspection confirms the work.
Because site work comes first on a sloped lot, the first draw on this project is larger than it would be on a flat suburban lot. Keep lien waivers from subcontractors with each draw request, and expect the final draw to wait for the certificate of occupancy.
Interest accrues only on what has been drawn, so carrying cost starts low and rises near completion. Carry a cushion for the months between completion and either a sale or the DSCR refinance.
| Draw | Share of cost | Amount |
|---|---|---|
| Excavation, rock and retaining walls | 16% | $78,560 |
| Foundation and framing | 28% | $137,480 |
| Roof, windows and rough systems | 22% | $108,020 |
| Drywall, cabinets and finishes | 24% | $117,840 |
| Final and certificate of occupancy | 10% | $49,100 |
Steep lots need more excavation, retaining walls, engineered foundations and careful drainage. East Tennessee's limestone geology means rock can show up anywhere, and sinkholes occur in some areas. A geotechnical review before you buy can save a lot of money.
Utility connections also vary. Knoxville Utilities Board serves the city, while other utility districts serve parts of the county. Ask about tap fees and capacity early.
Surprises below ground are the most common reason Knoxville projects go over budget. A contingency of 10% or more is wise, and more on lots with visible rock or steep grades.
Inside city limits, plans review and permits go through the City of Knoxville, and zoning follows the city's code, rewritten in 2020. In unincorporated Knox County, permits go through the county. Farragut, Maryville, Alcoa and Oak Ridge each have their own departments.
Some city neighborhoods have historic or infill design overlays that review the look of new homes. Check before you buy a lot with a specific design in mind.
Knoxville-Knox County Planning handles many zoning and subdivision matters for both the city and county. If your project needs a variance, rezoning or subdivision approval, build that time into the schedule.
Renting new homes works when the rent supports the full build cost. Newer homes near downtown and in strong suburban school zones rent at a premium over older stock, and lower maintenance helps cash flow.
Plan the rent from comparable new or recently renovated rentals, not older homes nearby. The exit is a DSCR loan qualified on that rent.
Weather is mild enough for year-round building in most years, but heavy rain can slow site work and grading on clay soils. Plan erosion control from the start.
Where zoning allows two or more units, a duplex or fourplex can make better use of an expensive infill lot. Check the zoning district, setbacks and parking rules for your parcel.
For 5-8 unit buildings, see our Knoxville 5-8 unit page for the permanent financing side.
Check whether your lot needs a separate utility tap for each unit.
We look for builder experience. A borrower without a build history can sometimes qualify with an experienced, licensed general contractor. Projects without plans or permits, or without an experienced builder, usually do not qualify.
Liquidity matters too. Site surprises like rock are common here, and you need room to cover overruns.
Experienced builders with completed projects in Knox County or nearby counties are a strong sign. Provide addresses and photos of past work.
Front-loaded site work means early draws can be large on hillside lots. Talk with your builder about which costs fall in the first draw and how much cash you need before it is released.
Use our draw schedule calculator to plan cash flow through the project.
Ask your builder for a draw-by-draw cash flow forecast before closing, so you know exactly when your own funds are needed.
Send plans, the budget, the lot survey and your builder's resume. Call (877) 298-1001 or use the form below. See the Tennessee construction page for statewide context.
On loan-to-cost, including land, hard costs and soft costs. Terms are set per project depending on plans, budget, location and experience.
Yes, with plans and a budget that account for excavation, retaining walls and drainage. A geotechnical report helps. Expect us to ask how the builder has handled similar sites before.
You request funds as stages are completed. After an inspection, the draw is released. Interest accrues on funds drawn.
Generally yes, or a clear path to them. Projects without plans or permits usually do not qualify. If permits are still in review, tell us where they stand and what the expected timeline is.
The City of Knoxville inside city limits, Knox County in unincorporated areas, and separate departments in Farragut, Maryville, Alcoa and Oak Ridge.
Sometimes, with an experienced licensed general contractor. Without one, it usually does not qualify.
Yes, where zoning allows. 5-8 unit buildings also qualify; nine or more units is commercial. Check setbacks, parking and lot size requirements in your zoning district before you design.
A DSCR loan qualified on rent once the home is complete and leased. For a spec home, the exit is a sale to a buyer, so recent sales of new homes nearby matter most.
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