Building new in New Orleans is a lesson in elevation, wind and history. Investors build raised doubles and single-family homes on vacant lots across the city, and every one starts with the flood map.
In short: LendingStreet finances ground-up construction in New Orleans for investors building 1 to 8 units, including raised single-family homes, doubles, small multi-unit buildings and build-to-rent homes. Loans are sized on loan-to-cost with terms set per project, and funds are released through inspected draws. Elevation requirements, insurance costs and historic district review are the issues that shape New Orleans budgets.
Vacant lots are common in Gentilly, Mid-City, Central City, the Seventh Ward, Bywater edges, Algiers and New Orleans East. The traditional shotgun double, two units side by side, translates well into new construction and suits the long-term rental market.
Neighborhoods near the universities, hospitals and downtown have the deepest rental demand. Spec homes for sale do best in areas with recent new-construction comparables.
New Orleans subsoils are soft in many areas, and foundations often need engineering for settlement as well as flood elevation. Drainage around the lot matters too, since street flooding during heavy rain is common in parts of the city. Builders who work here regularly plan for pilings or piers, elevated utilities and flood vents. Ask your builder how they have handled these items on recent projects.
Common New Orleans 1-8 unit projects: Each type has its own exit and its own local issues.
| Project type | Where it is common | Local note |
|---|---|---|
| Raised double | Gentilly, Mid-City, Seventh Ward | Rental exit into DSCR |
| Raised single-family | Algiers, Gentilly, New Orleans East | Sale or rental exit |
| Small 5-8 unit building | Central City, Mid-City corridors | Zoning and parking review |
| Infill in historic district | Bywater, Marigny, Treme | HDLC design review |
Permits run through the city's Department of Safety and Permits. In local historic districts, the Historic District Landmarks Commission reviews new construction design, and the French Quarter has its own commission. Plan for that review time.
New Orleans tightly restricts short-term rentals in residential areas, and the rules have changed several times. Do not plan a construction project around nightly rental income without confirming current rules. Long-term leases are the safer basis for a refinance.
Much of the city is in mapped flood zones, and new homes generally must be built to required elevation, often on piers. Wind design requirements are strict, and insurance for wind and flood in Louisiana is costly. Get both quotes for the finished property before you choose your exit.
We size ground-up loans on loan-to-cost. Add up land, hard costs, soft costs such as plans, engineering, permits and fees, and a contingency, and the loan is a share of that total. The rest is your equity.
We also check the project against what the finished building should be worth in New Orleans. If the cost is close to the expected value, the loan is usually smaller, because there is less room for overruns or a soft market.
This example is illustrative and not a quote. An investor builds a raised double in Gentilly to hold as a rental. Land costs $90,000, hard costs are $430,000, soft costs are $55,000 and the contingency is $25,000, for a total project cost of $600,000.
At a sample 80% loan-to-cost, the loan is $480,000 and the investor puts $120,000 into the project. Most of the loan funds through draws as work is completed.
Once the two units lease for a combined $3,400 a month and the property appraises at $650,000, a DSCR refinance at 75% LTV would be $487,500, enough to repay the $480,000 construction balance. The rent then has to cover the new payment, including taxes and insurance, at the program's DSCR minimum.
| Item | Amount |
|---|---|
| Land | $90,000 |
| Hard construction costs | $430,000 |
| Soft costs (plans, engineering, permits, fees) | $55,000 |
| Contingency | $25,000 |
| Total project cost | $600,000 |
| Loan at a sample 80% LTC | $480,000 |
| Investor cash in the project | $120,000 |
| Monthly rent at completion | $3,400 |
| Completed value | $650,000 |
| DSCR refinance at 75% LTV | $487,500 |
After closing, the loan funds in stages. You or your general contractor request a draw when a stage is complete, an inspection confirms it, and funds for that work are released.
Keep your contingency in the budget for surprises like rock, soil conditions or price changes, which are common on New Orleans sites. Draws are tied to the approved budget, so overruns beyond it generally have to be covered by the borrower.
Plans, permits, budget and builder experience matter most. Projects without plans or permits, or a borrower with no build track record and no experienced general contractor, usually do not qualify.
A realistic budget is the other half. Lenders compare your line items with local costs, so a New Orleans budget that skips site work, utility connections or fees will be revised before the loan is sized. A contingency of several percent of hard costs is common.
If you are building to sell, the exit is the sale of the finished home or units. If you are building to rent, the usual exit is a DSCR refinance once the property is leased, with a standard minimum DSCR of 1.0x and 30-year terms available.
Some investors keep both options open until the end of the build and decide based on the New Orleans market at completion. Having comparable sales and rents ready makes either path easier.
Our investor loans are business-purpose loans on non-owner-occupied property. To get a quote on a New Orleans project, use the form below or call (877) 298-1001 with your plans, budget and land details.
Most new homes in mapped flood zones must meet required elevation, and many builders raise homes even where not strictly required. Your designer can confirm the required height.
Yes, but the Historic District Landmarks Commission reviews design in local historic districts. Plan for review time and design requirements.
Generally no. New Orleans tightly restricts residential short-term rentals. Plan the exit on long-term rent unless current rules clearly allow STR use.
Wind and flood premiums go into the DSCR payment after you refinance. In Louisiana those premiums can be high, so quote them before you finalize the budget.
Yes. Small 5-8 unit buildings are part of our residential construction program. Buildings of 9 or more units are commercial.
Draws are tied to the approved budget, so overruns beyond the contingency generally have to be covered by the borrower. A realistic budget and contingency protect the project.
Usually only with an experienced general contractor on the project. A borrower with no build track record and no experienced GC usually does not qualify.
Loan-to-cost is the loan divided by the total project cost, including land, hard costs, soft costs and contingency. Construction loans are sized this way, with terms set per project.
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