Salem still has room to build. South Salem and West Salem have subdivisions with buildable lots, the older neighborhoods near downtown have infill sites, and Oregon's middle housing rules let many lots take more than one home. For investors with a builder and a plan, that adds up to steady opportunity for spec homes and small rental projects.
In short: LendingStreet finances ground-up construction of 1-8 unit investor properties in Salem, Keizer and the surrounding Marion and Polk county areas, including spec homes, build-to-rent houses, duplexes to fourplexes, cottage-style projects and small 5-8 unit buildings. Loans are sized on loan-to-cost with terms set per project, and funds are released through a draw schedule after inspections. Approved plans, permits, a realistic budget and builder experience drive approval.
Salem's urban growth boundary sets the outer limit for city development, and most new single-family construction happens near its edges: South Salem's hills and the areas around Kuebler Boulevard, West Salem in Polk County, and newer subdivisions in Keizer and east Salem. These lots usually have utilities in place and sell to buyers who want new homes close to state jobs and I-5.
Infill is concentrated closer to downtown and in NE Salem, where older lots can sometimes take a duplex, a house plus ADU, or a small group of townhomes under current zoning. Each site has its own setbacks, design standards and utility capacity, so confirm what is allowed with the City of Salem before you buy land.
Every project is underwritten on its own plans, budget and exit. These are the residential investor projects that fit.
| Project | Typical Salem setting | Exit |
|---|---|---|
| Spec single-family | South Salem, West Salem, Keizer subdivisions | Sale to owner-occupant |
| Build-to-rent house or duplex | Infill and edge lots | DSCR refinance |
| Middle housing (triplex, fourplex, cottages) | Residential lots that allow it | DSCR refinance or unit sales |
| Townhomes on divided lots | Infill sites | Individual sales |
| 5-8 unit building | Multi-family zoned parcels | DSCR refinance |
This example is illustrative and not a quote. A builder-investor buys a South Salem lot for $148,000 and builds a four-bedroom spec home. Hard costs are $402,000 and soft costs, including design, permits, system development charges and utility connections, are $66,000, for a total of $616,000. The loan is sized at 80% of cost, $492,800.
Funds are drawn as stages pass inspection, so interest accrues only on what has been drawn. Over a ten-month build and sale, estimated interest is about $23,716. The home sells for $742,000. After selling costs of about $44,520 and taxes, insurance and utilities of about $3,500, estimated profit is about $54,264 before income taxes.
| Draw | Amount |
|---|---|
| Lot purchase | $118,400 |
| Foundation | $48,240 |
| Framing and roof | $108,540 |
| Mechanical, electrical, plumbing | $84,420 |
| Insulation, drywall, exterior | $76,380 |
| Finishes and final | $84,420 |
| Total loan | $492,800 |
Oregon's middle housing law requires cities the size of Salem to allow duplexes on residential lots and triplexes, fourplexes, townhouses and cottage clusters in many residential areas, subject to local standards. Salem has updated its code to match. For a build-to-rent investor, that means a lot that once took one rental can sometimes take two to four, spreading land and site costs across more rents.
Run the DSCR math on the finished project before you commit. Salem rents are solid but not unlimited, and a project that costs too much per unit may not support the long-term loan you need to pay off construction. Smaller units with shared site work often pencil better than one large house, and cottage clusters can appeal to tenants who want a detached home without a big yard. Some middle housing projects can also be divided onto separate lots, which opens a sale exit for individual units.
The City of Salem's permit center handles plan review and inspections inside city limits; Keizer, Marion County and Polk County handle their own areas. New homes pay system development charges for transportation, parks, water and wastewater, plus permit fees and utility connections. Fees vary by location and size, so get a current estimate on your exact plan before you finalize the budget.
Projects without approved plans or permits, or a borrower with no build track record and no experienced general contractor, usually do not qualify. Oregon requires construction contractors to be licensed with the Construction Contractors Board, and we review the builder's record on similar homes.
Oregon adds new construction to the tax roll based on the value of the improvements, so a finished home carries a higher bill than the lot did. For a spec home, that matters mostly during the listing period. For a build-to-rent project, ask the Marion or Polk County assessor how new value is added, and budget a realistic finished tax figure in your DSCR math.
Spec homes sell to owner-occupants, many of them state employees and healthcare workers with steady incomes, and buyers relocating from the Portland area who want a newer home for less. Price the finished home against recent new-construction sales in the same part of town, since resale of older homes is a different market. Build-to-rent projects refinance into a DSCR loan once leased, and newly built units are exempt from Oregon's annual rent cap for their first 15 years. Five or more finished rentals can move into a blanket portfolio loan. The draw schedule calculator helps map funding to your build timeline.
Send the plans, budget, lot details, builder information and your exit through the form below, or call (877) 298-1001. For statewide terms, see our Oregon construction loan page.
On loan-to-cost. The loan covers a share of land, hard costs and soft costs, with terms set per project.
Typically interest accrues on funds as they are drawn, not on undrawn amounts. Your loan terms will spell out how it works.
Yes. Spec homes are a common Salem project. We look at new-home sales comps in the area.
Often yes under Oregon's middle housing law and Salem's code, subject to local standards. Confirm your lot with the city.
Yes. Oregon requires a Construction Contractors Board license, and we review the builder's record.
Yes. SDCs, permits and utility connections are soft costs in the budget used for sizing.
Through a draw schedule after an inspector confirms each stage.
Yes, including West Salem and nearby towns. Rural lots on wells or septic get extra review.
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