Central Arkansas lots are inexpensive by national standards, and new rentals command a clear premium over the older stock around them. That combination makes small build-to-rent projects one of the more practical ways to grow a Little Rock portfolio.
In short: LendingStreet finances ground-up construction for 1-8 unit investor projects in Little Rock and central Arkansas, including 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 detailed budget and builder experience drive approval.
In Little Rock, the most common investor projects are infill: new homes or duplexes on vacant lots in Midtown, the Capitol View and Stifft Station areas, the east side and parts of the south and southwest, where older houses have been removed over the years. Build-to-rent single-family projects are more common in growing suburbs such as Bryant, Benton, Conway, Cabot and parts of Sherwood and Maumelle.
West Little Rock and Chenal Valley have higher-end spec building, but those lots cost more and HOA covenants can restrict rentals. Read the covenants before you plan a build-to-rent there.
Rental demand for new construction in central Arkansas comes from medical staff, government workers, Air Force families near Jacksonville and Cabot, and students and staff around the universities in Conway. New homes and duplexes with central air, modern layouts and storm-resistant features lease quickly in most of these areas.
The City of Little Rock's Planning and Development department handles zoning and building permits within city limits; North Little Rock, Conway, Benton and the other cities each run their own process, and unincorporated areas fall under the county. Infill lots may need a survey, a replat if lots are combined or split, and confirmation of utility capacity. Lots in a local historic district need design approval for new construction.
Some older infill lots carry liens for past demolition or mowing by the city. Your title search should catch them; clear them before closing.
Severe storms and tornadoes are a fact of life in central Arkansas. Many builders now use impact-resistant roofing, hurricane straps or clips and better window protection, which can lower insurance costs on the finished rental. Some investors add a storm shelter or safe room, which tenants value.
Lots near the Arkansas River, Fourche Creek and other creeks may be in a flood zone. Check the flood map before you buy the lot, because elevation requirements can add cost.
This example is illustrative and not a quote. An investor buys 2 adjacent infill lots for a total of $70,000 and plans two side-by-side duplexes. Hard costs are budgeted at $610,000, and soft costs including plans, permits, utility connections and an interest reserve at $75,000. Total cost is $755,000.
If the loan is sized at 80% of cost, it is $604,000, and the investor's equity including the lots is $151,000. If the finished duplexes appraise at a combined $760,000 and lease at about $1,600 per unit, a 75% LTV DSCR refinance of $570,000 would carry estimated principal and interest of about $3,927. With taxes of about $855 and insurance of $300, DSCR on the combined rent is about 1.26x, above the 1.0x standard minimum.
Budget time as well as money. Spring storm season and summer heat can slow some trades, and interest during construction is a real cost. A realistic schedule, with weather allowance, protects your budget and your exit.
| Item | Amount |
|---|---|
| Lots | $70,000 |
| Hard costs | $610,000 |
| Soft costs | $75,000 |
| Total project cost | $755,000 |
| Loan at 80% of cost | $604,000 |
| Investor equity | $151,000 |
Hard-cost funds are released through a draw schedule after each stage is inspected: foundation, framing and roof, rough mechanical, electrical and plumbing, drywall, and finishes. Your general contractor's payment schedule should match the draw schedule, and you should hold enough cash to cover the gap between work done and the next draw. Our construction draw schedule calculator can help you plan.
Projects that usually qualify have approved plans and permits or a clear near-term path to them, a line-item budget with contingency, a realistic schedule and either a borrower with completed builds or an experienced licensed general contractor.
Projects without plans or permits, or a first-time builder with no experienced general contractor, usually do not qualify. Starting with a rehab or a single home can build the track record.
A first project is easier to approve when it is modest. One duplex or a single build-to-rent house on a clean infill lot, with a general contractor who has built in Little Rock before, is a much simpler file than a multi-building plan with a first-time builder.
Most build-to-rent investors refinance each finished property into a DSCR loan once it is leased. New rentals in Little Rock usually rent at a premium to nearby older homes. Investors who complete five or more rentals can combine them under a blanket portfolio loan with one payment and release provisions.
Spec building in central Arkansas works best where buyers want new construction and resale inventory is limited, such as infill lots in established Little Rock neighborhoods and growing suburbs like Bryant and Conway. Price your finished home against recent sales of newer homes nearby, and plan a rental exit in case the sale takes longer. New homes rent well in most of the metro.
Our investor loans are business-purpose loans on non-owner-occupied property. Send plans, permit status, budget, schedule and builder background through the form below, or call (877) 298-1001, and we will review loan-to-cost sizing and the draw schedule.
Investor 1-8 unit projects: spec homes, build-to-rent homes, infill duplexes and fourplexes and small 5-8 unit buildings.
On loan-to-cost, including land, hard costs and soft costs, with terms set per project.
You need approved plans and permits or a clear path to them. Projects without them usually do not qualify.
Yes, but new construction in a local historic district usually needs design approval. Allow time for it.
It can lower insurance costs on the finished rental and make it more attractive to tenants.
Most investors refinance into DSCR loans after leasing, or sell. Five or more finished rentals can go into a blanket portfolio loan.
No. Our investor loans are business-purpose loans on non-owner-occupied property. The property has to be a rental or investment project, not your residence.
Possibly, but check the flood map first. Lots in flood zones may need elevation and flood insurance, which add cost.
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