On the Gulf Coast, how you build matters as much as what you build. In Mobile and across the bay in Baldwin County, wind design, flood elevation and the insurance quote shape the budget and the finished rental's cash flow.
In short: LendingStreet lends on new 1-8 unit investor construction in and around Mobile. Loans are sized on loan-to-cost, terms are set project by project, and money is released through a draw schedule after inspections. Investors here build spec homes in West Mobile and Baldwin County, build-to-rent houses in Semmes, Saraland and Theodore, and infill duplexes in Midtown. Our investor loans are business-purpose loans on non-owner-occupied property.
In the city, infill projects show up in and around Midtown and older neighborhoods near the Oakleigh and Old Dauphin Way areas, where lots between existing homes can support a new single-family house or duplex. West Mobile, Tillman's Corner and Theodore have more room for new subdivisions, and Semmes and Saraland to the north attract build-to-rent and starter spec homes.
Across Mobile Bay, Baldwin County has been one of Alabama's fastest-growing counties. Daphne, Spanish Fort, Fairhope, Loxley, Robertsdale and Foley draw both buyers and renters, and land there usually costs more than in western Mobile County.
| Project type | Where it tends to fit | Local issues to check |
|---|---|---|
| Infill single-family or duplex | Midtown and older Mobile neighborhoods | Historic review on some blocks, older utility lines |
| Build-to-rent houses | Semmes, Saraland, Theodore, Tillman's Corner | Subdivision approvals, flood zones near creeks |
| Spec homes | Daphne, Spanish Fort, Fairhope, Foley | Land cost, wind and flood design, HOA rules |
The City of Mobile handles zoning and building permits inside city limits, and its Architectural Review Board reviews new construction in local historic districts, which cover a good part of the older city. Outside the city, Mobile County and the smaller cities like Saraland and Semmes each issue their own permits.
In Baldwin County, many cities administer their own codes, and coastal jurisdictions add flood and wind requirements. Where a lot sits in a mapped flood zone, the finished floor generally has to be at or above the required elevation, which affects foundation type and cost.
Hurricanes are the defining design issue. Alabama law requires insurers to offer premium discounts for homes built to the FORTIFIED standard, and many Gulf Coast builders now use it, which can lower insurance on the finished rental and make the DSCR math work.
Construction loans are based on loan-to-cost (LTC). Add the land, the hard construction budget and the soft costs such as plans, permits and fees, and the loan is a share of that total, with terms set per project.
Three things move the number: a detailed, line-item budget; a builder or general contractor with a track record on similar homes; and an after-completion value that leaves a cushion over total cost.
This example is illustrative and not a quote. An investor builds a three-bedroom build-to-rent home in Semmes with a FORTIFIED roof. Land costs $32,000, the hard-cost budget is $228,000 and soft costs such as plans, permits, fees and builder's risk insurance are $22,000, for a total project cost of $282,000. If the project is sized at 80% of total cost, the construction loan is $225,600 and the investor brings $56,400 in cash or land equity.
At completion the property appraises at $320,000 and leases as one 3-bedroom, 2-bath home, for $2,050 a month. A DSCR refinance at 75% LTV is $240,000, enough to pay off the $225,600 construction loan with about $14,400 left over before closing costs. Estimated principal and interest on a 30-year loan is about $1,637; with taxes of $160 and insurance of $190 a month, the payment is about $1,987 and the DSCR is about 1.03x.
That clears the 1.0x standard minimum. Interest during construction and closing costs are not shown, and your numbers will differ.
| Item | Amount |
|---|---|
| Land | $32,000 |
| Hard costs | $228,000 |
| Soft costs | $22,000 |
| Total project cost | $282,000 |
| Construction loan at 80% LTC | $225,600 |
| Completed value | $320,000 |
| DSCR refinance at 75% LTV | $240,000 |
| Estimated principal and interest | $1,637 |
| Taxes and insurance | $350 |
| Monthly rent | $2,050 |
| DSCR | About 1.03x |
Funds for land are typically advanced at closing, and construction money is released in draws as work is completed. Before each draw, an inspector confirms progress against the budget, such as foundation, framing, dry-in, mechanicals and finishes. Interest is generally charged on funds drawn, not on the full commitment.
Build a draw schedule before you close so you know how much cash you need between draws. Our construction draw schedule calculator can help you map it out.
Alabama property taxes are low by national standards, but rental property is placed in a different class from an owner's homestead and assessed at a higher assessment ratio. Confirm the classification and millage with the Mobile County or Baldwin County Revenue Commission, and budget taxes on the completed value.
Alabama charges a mortgage recording tax and a deed tax at recording. On the land purchase and again on the DSCR refinance at completion, ask your closing attorney or title company for the figures.
These items let us size the loan and set the draw schedule. Without plans, permits or an experienced builder on the team, a project is usually not ready for a construction loan.
Our construction loans are business-purpose loans on non-owner-occupied 1-8 unit projects in Mobile and Baldwin counties. Tell us about the project, including land, plans, budget, builder and exit, and the team will review it and outline terms. You can also read our Alabama construction loans page. Get a quote with the form below or call (877) 298-1001.
It helps the exit. Alabama requires insurers to offer discounts for FORTIFIED homes, so a lower premium on the finished rental can raise the DSCR when you refinance.
Yes. Spec homes and build-to-rent projects in Daphne, Spanish Fort, Fairhope, Foley and nearby towns fit our ground-up program when plans, permits and a qualified builder are in place.
Loan-to-cost (LTC) is the loan amount divided by total project cost, including land, hard costs and soft costs. Construction loans are sized on LTC, with terms set per project.
Yes. Exits are by sale or refinance. Spec builders usually sell, while build-to-rent investors usually refinance into a DSCR loan.
Often, but the Architectural Review Board reviews new construction in local historic districts. Get design approval before you finalize the budget.
Rental property is assessed in a higher class than a homestead. Confirm the class and millage with the county Revenue Commission, and use the completed value in your estimate.
Plans and permits, or a clear path to them, are expected. Projects without plans or permits usually do not qualify.
Terms are set per project, based on the size of the build and the schedule. Short-term, interest-only financing during the build is typical, followed by a sale or a DSCR refinance.
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