The Rio Grande Valley is one of the fastest-growing parts of Texas, and much of that growth is new single-family and small multifamily product. For investors, the questions that decide a McAllen build are usually drainage, platting and the tax bill, not the cost of lumber.
In short: Yes. LendingStreet offers ground-up construction loans for spec homes, build-to-rent houses and small 2-8 unit buildings around McAllen, sized on total project cost and funded in stages as work passes inspection. Typical projects include spec homes in McAllen, Mission and Edinburg, fourplexes near UTRGV, and build-to-rent houses in Pharr, San Juan and Weslaco. Every loan is a business-purpose loan on non-owner-occupied property, with an exit by sale or refinance into a DSCR rental loan.
North McAllen and the corridors along Ware Road, Taylor Road and Trenton Road have seen steady new subdivision activity, while Mission and Sharyland to the west offer newer neighborhoods with larger homes. Edinburg, home to the University of Texas Rio Grande Valley, has strong demand for duplexes and fourplexes leased to students, staff and medical workers.
To the east, Pharr, San Juan, Alamo, Donna and Weslaco have lower land costs and attract build-to-rent projects aimed at working families. Many investors here build one-story concrete-slab homes with three bedrooms, which suits the climate and the tenant base.
| Project type | Where it tends to fit | Local issues to check |
|---|---|---|
| Duplexes and fourplexes | Edinburg near UTRGV, central McAllen | Parking and lot coverage, utility capacity |
| Spec single-family | North McAllen, Mission, Sharyland | Resale comparables in newer subdivisions |
| Build-to-rent houses | Pharr, San Juan, Alamo, Weslaco | Platting status, drainage approvals |
Inside city limits, McAllen, Edinburg, Mission and Pharr each run their own zoning and building permits. Outside city limits, Texas counties have little zoning power, but Hidalgo County enforces subdivision rules that require water, wastewater and drainage to be in place before lots are sold or built on. These rules exist largely because of the region's history with colonias, so an unplatted rural tract is rarely a quick start.
Many cities in the Valley also sit inside an extraterritorial jurisdiction where city subdivision standards apply. Before buying land, confirm who reviews the plat, whether the lot is served by a water supply corporation or a city utility, and what drainage district approvals are needed.
This example is illustrative and not a quote. An investor builds a fourplex on a platted lot in Edinburg. Land costs $70,000, the hard-cost budget is $560,000 and soft costs such as plans, permits, fees and builder's risk insurance are $45,000, for a total project cost of $675,000. If the project is sized at 80% of total cost, the construction loan is $540,000 and the investor brings $135,000 in cash or land equity.
At completion the property appraises at $780,000 and leases as four 2-bedroom units at $1,350 each, for $5,400 a month. Because Texas property taxes on a fourplex are a large monthly expense, the investor plans the DSCR refinance at 65% LTV instead of the 75% maximum. That loan is $507,000, so the investor pays down about $33,000 of the $540,000 construction loan with cash and leaves more equity in the property. Estimated principal and interest on a 30-year loan is about $3,459; with taxes of $1,380 and insurance of $310 a month, the payment is about $5,149 and the DSCR is about 1.05x.
That clears the 1.0x standard minimum. Interest during construction and closing costs are not shown, and your numbers will differ.
| Item | Amount |
|---|---|
| Land | $70,000 |
| Hard costs | $560,000 |
| Soft costs | $45,000 |
| Total project cost | $675,000 |
| Construction loan at 80% LTC | $540,000 |
| Completed value | $780,000 |
| DSCR refinance at 65% LTV | $507,000 |
| Estimated principal and interest | $3,459 |
| Taxes and insurance | $1,690 |
| Monthly rent | $5,400 |
| DSCR | About 1.05x |
The Valley is very flat, and heavy rain can overwhelm drainage quickly, as several flood events in recent years showed. Hidalgo County Drainage District No. 1 and city engineers review drainage plans, and finished floor elevations matter. Hurricanes and tropical storms reach the Valley too, so wind-rated construction is worth the cost.
We size new construction on loan-to-cost, not on today's value of a vacant lot. Total cost means the land, the hard-cost budget and the soft costs: architecture, engineering, permits, impact or tap fees and builder's risk insurance. The share we lend and the terms are set per project.
Equity can come from cash or from land you already own. A realistic completed value, supported by nearby new-construction sales or rents, matters as much as the cost line.
Construction money is paid out in stages. You or your builder request a draw, an inspector verifies the completed work against the budget line items, and the funds are released. Common milestones are site work and foundation, framing, dry-in, mechanical rough-ins, drywall and final.
Because interest generally accrues only on drawn funds, a well-planned schedule keeps carrying costs down. Use our construction draw schedule calculator to test the timing.
Texas has no state income tax, so local governments lean on property taxes. A home can be taxed by the county, city, school district, a hospital district, South Texas College and sometimes a drainage district. The Hidalgo County Appraisal District values improvements as of January 1, so a home finished mid-year may show a partial value on its first bill and a full value the next year.
Investors do not receive homestead exemptions, so when you estimate the DSCR on the finished rental, budget taxes on the full combined rate applied to the completed value. Texas has no state transfer tax, which helps closing costs on the land purchase.
A complete package gets a faster answer. Projects without plans or permits, or a borrower with no build track record and no experienced general contractor, usually do not qualify.
LendingStreet works with investors and builders throughout Hidalgo, Cameron and Starr counties. Share the lot, the plans, the line-item budget and who is building it, and we will come back with how we would size the loan and structure the draws. Our Texas construction loans page covers statewide rules. Call (877) 298-1001 or fill out the form below.
Possibly, but Hidalgo County subdivision rules require water, wastewater and drainage before lots can be developed. Raw unplatted land usually needs approvals before it fits a construction loan.
Yes. Duplexes, triplexes and fourplexes, and small 5-8 unit buildings, qualify as residential construction when plans, permits, budget and builder experience are in place.
Drainage reviews can require detention, fill to raise the pad, or specific floor elevations. Get the engineer's requirements before you finalize the budget.
The appraisal district values improvements as of January 1. A home finished during the year may be partially valued at first. Underwrite the full value, since that is what you will pay going forward.
Through a draw schedule. After each stage of work, an inspection confirms progress and the matching funds are released.
Yes. Buildings with 5 to 8 units are residential construction under our program, though they get closer review. Nine or more units is commercial.
Plan for it. A contingency line helps, and overruns beyond the budget are generally covered by the borrower, so keep reserves.
Yes, land you own can count toward your equity in the project. Bring the deed, any existing loan payoff and the plans, and we will size the loan on total cost.
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