Rochester is still adding land at its edges. New subdivisions in the northwest and southeast, and in nearby Byron, Kasson and Stewartville, give investors room to build single-family rentals and twin homes for a workforce that keeps growing around Mayo Clinic.
In short: LendingStreet finances ground-up construction of 1-8 unit investment properties in Rochester and Olmsted County, including spec homes, build-to-rent houses, twin homes, small multi-unit buildings and 5-8 unit projects. Loans are sized on loan-to-cost with terms set per project, and funds are released through draws after inspections. Plans, permits, a detailed budget and an experienced builder are what make a Rochester project financeable.
The most common investor project here is a twin home, two attached units on separate or shared lots, or a single-family home built to rent to medical staff and families. In established parts of the city, some investors build infill duplexes on lots where an old house came down. Larger investors build small multi-unit rentals of up to 8 units on land zoned for them.
New construction appeals to Rochester tenants because it offers modern layouts, attached garages for Minnesota winters and lower utility costs.
Rents for new construction in Rochester are supported by people who move to the city for medical careers and want a newer home without buying one. Many sign multi-year leases during residency or fellowship. That long tenure is helpful for a build-to-rent investor, because it reduces turnover in the first years after the refinance.
Before you buy a lot, confirm zoning, setbacks and whether the subdivision's covenants allow rentals. Some newer developments restrict leasing or require owner approval. Check whether utilities are stubbed to the lot, whether there are special assessments for streets and utilities, and whether the builder or developer controls the homeowners association.
Lots in Byron, Kasson and other nearby cities fall under those cities' rules, which differ from Rochester's.
Special assessments deserve close attention. When a city builds streets, water and sewer for a new subdivision, the cost is often assessed against the lots and paid over time with property taxes. That assessment becomes part of your tax bill, which lowers the DSCR on your refinance. Ask the seller or the city for any pending or levied assessments before you close on the land.
This example is illustrative and not a quote. An investor buys a lot in a new northwest Rochester subdivision for $80,000 and builds a twin home with two three-bedroom units. Hard costs are $540,000 and soft costs (plans, permits, utility connections, interest reserve and fees) are $50,000, for a total of $670,000.
If the loan is sized at 80% of cost, it is $536,000, and the investor contributes $134,000. Once both units lease at $2,350, rent is $4,700 a month. A DSCR refinance of $550,000 has estimated principal and interest of about $3,799; with $650 of taxes and $220 of insurance the payment is about $4,669, a DSCR of about 1.01x.
| Draw stage | Share of hard cost | Amount |
|---|---|---|
| Footings, foundation and slab | 15% | $81,000 |
| Framing, roof and windows | 25% | $135,000 |
| Rough mechanical, electrical, plumbing | 20% | $108,000 |
| Insulation, drywall, cabinets, flooring | 25% | $135,000 |
| Final, landscaping and certificate of occupancy | 15% | $81,000 |
New homes in Rochester go through plan review and permits with the local building safety office. Minnesota's residential energy code sets strict requirements for insulation, air sealing and ventilation, and new homes in the state include radon control measures. Footings must sit below the frost line.
Your builder should be licensed as a residential building contractor by the Minnesota Department of Labor and Industry and carry proper insurance.
Foundations and site work go most smoothly from spring through fall. Concrete poured in freezing weather needs heat and protection, and those costs belong in the budget. Many builders aim to have the shell closed in before winter so interior work can continue.
Plan the schedule so the home is ready to lease in spring or early summer, when Rochester's relocation season brings the most tenants.
Material and labor lead times also change by season. Framing crews and concrete subcontractors are busiest in summer, and window or truss orders can take weeks. Lock in key trades and order long-lead materials early so a strong start does not stall halfway through the build.
Construction funds are released in stages after an inspector confirms completed work. Map your builder's payment schedule to the draw stages with our draw schedule calculator. Collect lien waivers from the general contractor and major subcontractors at each draw, since Minnesota mechanic's lien law gives them lien rights that can affect your title at refinance or sale.
For a rental, the exit is a DSCR refinance sized on the leased rent. Budget the ratio during planning using non-homestead Olmsted County taxes and a real insurance quote. If you plan to sell, price the exit on recent sales of new homes in the same subdivision, not on older homes nearby.
A project without plans or permits in process, or a borrower with no build history and no experienced general contractor, usually does not qualify. Land with unresolved zoning or a budget without contingency also struggles. Our investor loans are business-purpose loans on non-owner-occupied property, so we do not finance a home you will live in.
Send the lot address, plans, budget, builder details and exit plan through the form below or call (877) 298-1001. We will review the project and size it on loan-to-cost. See also our Minnesota construction loan page.
Yes. Twin homes, single-family rentals, duplexes and small buildings up to 8 units qualify as ground-up residential projects. Build-to-rent and build-to-sell projects both qualify, as long as the plans, budget and builder are strong.
On loan-to-cost, with terms set per project based on the plans, budget, builder and exit.
Through a draw schedule, with funds released after inspections confirm each stage. Inspections confirm completed work before each release, which protects both you and the lender.
You need plans and permits in hand or clearly in process. Projects without them usually do not qualify.
Yes. We lend throughout Olmsted and Dodge counties; local zoning and permits follow that city's rules. Local permits and zoning in those cities follow their own rules.
Yes, with cold-weather concrete, heat and snow costs in the budget and schedule.
Sell the finished property or refinance into a DSCR loan that qualifies on the leased rent.
If you have no build history, yes. An experienced, licensed general contractor is usually required.
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