Dane County has been short on housing for years, and new construction is spreading from Madison's edges into Verona, Fitchburg, Sun Prairie, Waunakee and DeForest. Inside the city, infill lots let investors add duplexes and small buildings close to jobs and campus.
In short: LendingStreet finances ground-up construction of 1-8 unit investment properties in Madison and across Dane County, including spec homes, build-to-rent duplexes and infill fourplexes. 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.
Most new subdivisions are on the edges: Verona and Fitchburg to the southwest, near major employers; Sun Prairie and Cottage Grove to the east; Waunakee, DeForest and Middleton to the north and west. Finished lots in approved plats make spec homes and side-by-side duplexes straightforward to permit.
Inside Madison, infill is harder but valuable. A narrow east side or Northside lot may support a new two-unit or small multi-unit if zoning allows. Lots near campus and the isthmus are scarce and expensive, and neighborhood input can shape what gets approved.
We look for projects that are ready to build: approved plans, a permit issued or close to it, a line-item budget and a builder who has completed similar work. Projects without plans or permits, or a borrower with no build track record and no experienced general contractor, usually do not qualify.
In Wisconsin, one- and two-family homes are built under the state's Uniform Dwelling Code. Buildings with three or more units generally fall under the state's commercial building code, which can bring different design, fire-safety and plan review requirements. That difference affects the design, the budget and the schedule of a new fourplex or six-unit building.
Talk with your architect and the local building department early about which code applies and what plan review is needed.
Construction loans are sized against total project cost: land, hard costs and soft costs such as design, permits and fees. Terms are set per project based on your experience, the location and the exit plan. Land you already own can count toward your share.
Funds are released after inspections at each stage of the draw schedule agreed at closing. Our construction draw schedule calculator can help you map out the timing.
This example is illustrative and not a quote. An investor buys a lot in Fitchburg for $150,000 and plans a side-by-side duplex with $545,000 in hard costs and $58,000 in soft costs, for a total of $753,000. Assuming the project is sized at 80% of cost for this example, the loan is $602,400.
Over a ten-month build with an average drawn balance of about $329,900, estimated interest-only carry is about $28,866. When finished, both units lease at $2,800. If the duplex appraises at $880,000, a 70% DSCR refinance of $616,000 carries estimated principal and interest of about $4,307; with taxes of $1,300 and insurance of $190, DSCR is only about 0.97x, below the 1.0x standard minimum.
At 65% the refinance is $572,000, the payment is about $5,490 and DSCR is about 1.02x. Because that loan is smaller than the $602,400 construction balance, the investor brings about $30,400 plus closing costs to the refinance. Planning for that from the start is what keeps a Madison build-to-rent project on track.
| Draw stage | Share of hard costs | Amount released |
|---|---|---|
| Footings and foundation (below frost line) | 15% | $81,750 |
| Framing, roof and windows | 30% | $163,500 |
| Rough plumbing, electrical and HVAC | 15% | $81,750 |
| Insulation, drywall and finishes | 25% | $136,250 |
| Final inspection and occupancy | 15% | $81,750 |
Wisconsin's deep frost line means footings must go well below the surface, and pouring foundations in deep winter requires heating, blankets and extra time. Many Dane County builders try to have homes framed and enclosed before winter so interior trades can keep working.
Build that calendar into your loan term and carrying costs. A project that starts in November will likely finish later and cost more to carry than one that starts in April.
New homes in Madison and the suburbs are assessed once complete, and Wisconsin's property taxes are high. When you plan a build-to-rent project, budget taxes on the finished value, not on the vacant lot. That number goes straight into the DSCR on the refinance, as the example above shows.
Tax rates also differ between Madison, Fitchburg, Verona, Sun Prairie and the other municipalities, and between school districts. Two similar duplexes a few miles apart can carry noticeably different bills. Ask the municipal assessor for the current rate and run your numbers before you choose a lot.
Spec homes are usually sold, and the loan is repaid at closing. Build-to-rent homes and duplexes can move into a DSCR loan once they have an occupancy permit and signed leases. Lease timing matters in Madison too; finishing in spring or early summer lines up with the busiest leasing season.
Send LendingStreet your plans, budget, builder information and lot details. We will review the project, explain how it would be sized and walk you through the draw process. Statewide information is on our Wisconsin construction loans page.
If you are still choosing a lot, call before you buy. We can tell you what the project would need to be fundable, which often shapes the lot, the plan and the builder. A package with plans, permit status, fee estimates and a signed builder contract gets the fastest review.
Yes. We finance ground-up spec and build-to-rent projects on 1-8 unit investment properties across Dane County, including Waunakee, DeForest, Middleton and Cottage Grove.
On loan-to-cost: land, hard costs and soft costs, with terms set per project based on experience, location and exit.
Generally yes. In Wisconsin, one- and two-family homes use the Uniform Dwelling Code, while buildings with three or more units generally use the commercial building code. Confirm with your architect.
Through a draw schedule agreed at closing. Each stage is inspected before funds for that stage are released, so plan to pay your subcontractors on that rhythm.
Yes. Deep frost lines and cold weather slow foundation and exterior work, which affects your schedule and carrying costs.
It helps a great deal. A borrower without a track record usually needs an experienced general contractor to qualify.
Yes, once it has an occupancy permit and leases. Budget taxes on the finished value when you plan the refinance.
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