Providence is almost fully built out, so new construction here usually means one lot at a time: a vacant parcel where a fire-damaged triple-decker once stood, a side lot split off a larger property, or a teardown in a suburb where land is worth more than the house on it.
In short: LendingStreet finances ground-up construction of 1-8 unit investment properties across the Providence metro, including spec homes, build-to-rent houses, infill duplexes and fourplexes and small 5-8 unit buildings. Loans are sized on loan-to-cost (LTC), terms are set per project, and money is released through a draw schedule after inspections. Approved plans, permits, a realistic budget and an experienced builder are what get a project funded.
Most investor construction in the city is infill. Vacant lots in the West End, Olneyville, Elmwood, South Providence and Smith Hill can support a new two- or three-unit building where zoning allows it. Modern versions of the triple-decker, with separate utilities and code-compliant fire separation, are a natural fit for these lots and for the city's rental demand.
In the suburbs, the work looks different. Cranston, Johnston, North Providence, Smithfield and Warwick have more room for single-family spec homes and occasional duplexes, while teardown-and-rebuild projects show up in higher-priced pockets of East Providence and Barrington.
Providence's zoning ordinance sets which residential districts allow two-family, three-family and multi-unit buildings, along with lot size, height and parking requirements. A project that needs a variance or special use permit adds months, so check the district and dimensional rules before you buy the land.
Lots in local historic districts need Historic District Commission approval for new buildings, which covers design details like massing, windows and materials. Building permits run through the city's inspection department, and Rhode Island's state building code applies across the metro. Each suburb has its own planning and zoning board.
We generally need approved plans and issued permits, or a clear path to them, before construction funding starts. Projects without plans or permits usually do not qualify.
A construction loan is sized against the total cost of the project: land, hard costs such as materials and labor, and soft costs such as architecture, engineering, permits and insurance. The appraiser also estimates the value of the finished building, and the loan has to make sense against both numbers.
You put in equity first, often through land you already own or cash at closing, and the loan covers the rest of the budget as work is completed.
In Providence, the completed-value check matters as much as cost. A new two-family on a block of older triple-deckers may appraise based on renovated older buildings nearby, so a very high-end finish package may not add value one for one. Build to the rent and resale level of the street, and keep the budget tied to what the finished building can support.
Interest during construction is usually paid on the money drawn so far, not the full loan amount, so the carrying cost grows as the project moves forward. Include it, along with builder's risk insurance and property taxes on the land, in your soft-cost budget.
This example is illustrative and not a quote. An investor buys a vacant West End lot for $140,000 and plans a new two-family. Hard costs are $560,000 and soft costs $70,000, for a total project cost of $770,000. For this example, assume the loan is sized at 80% of total cost, or $616,000, so the investor contributes $154,000.
When the building is finished, each unit leases for $2,600, a combined $5,200 a month, and the completed value is estimated at $900,000. A 30-year DSCR loan at 75% of that value is $675,000, which pays off the construction loan. Estimated principal and interest is about $4,559, and with $1,150 in taxes and $300 in insurance the payment is about $6,009, for a DSCR of about 0.87x.
| Item | Amount |
|---|---|
| Land | $140,000 |
| Hard costs | $560,000 |
| Soft costs | $70,000 |
| Total project cost | $770,000 |
| Construction loan at 80% of cost | $616,000 |
| Investor equity | $154,000 |
| Completed value | $900,000 |
| DSCR refinance at 75% of value | $675,000 |
| DSCR at $5,200 rent | 0.87x |
Construction money is not handed over at closing. The budget is split into stages, and after each stage an inspector confirms the work before funds are released. Your builder needs enough working capital to complete each stage before being reimbursed.
| Stage | Share of hard-cost budget |
|---|---|
| Foundation and site work | 15% |
| Framing and roof | 25% |
| Rough plumbing, electrical and HVAC | 20% |
| Insulation and drywall | 15% |
| Finishes, kitchens and baths | 20% |
| Final inspection and certificate of occupancy | 5% |
Foundation work, framing and roofing are easier from spring through fall. A project that breaks ground in November can lose weeks to frozen ground, snow and short days, which adds interest and insurance cost. Plan the start date with the weather in mind, and build some slack into the schedule for the final inspection and certificate of occupancy.
Coastal and riverside lots also need a flood check. Parcels near the Providence and Woonasquatucket rivers or the upper bay can sit in mapped flood zones that affect foundation design and insurance.
We look at the project, the plans and the team. A borrower with completed builds, or one working with an experienced licensed general contractor, is in the strongest position. A borrower with no build track record and no experienced general contractor usually does not qualify.
Send the lot address, plans, budget and timeline through the form below, or call (877) 298-1001. You can also model the stages with our construction draw schedule calculator before you apply.
Residential investment property from one to eight units: spec homes, build-to-rent houses, infill duplexes and three-families, fourplexes and small 5-8 unit buildings.
It is sized on loan-to-cost, meaning the total project cost of land, hard costs and soft costs, and checked against the expected completed value. Terms are set per project.
We generally need approved plans and permits, or a clear path to them. Projects without plans or permits usually do not qualify.
Through a draw schedule. After each stage is complete and inspected, funds for that stage are released.
Often, yes. Owned land can count toward your contribution, subject to its value and the project budget.
New construction needs Historic District Commission approval. Get that review done before you apply so the plans we underwrite are final.
Yes. Once it is leased, you can refinance into a 30-year DSCR loan based on the rent.
Only with an experienced general contractor and a complete plan. A borrower with no build history and no experienced builder usually does not qualify.
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