Most of St. Paul was built out generations ago, so new rental construction here is infill: a triplex on a cleared lot in Hamline-Midway, a fourplex where a fire-damaged house came down, or new homes in redevelopment areas like Highland Bridge.
In short: LendingStreet finances ground-up construction of 1-8 unit investment properties in St. Paul, including spec homes, build-to-rent houses, duplexes, triplexes, fourplexes 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 an experienced builder are what make a St. Paul project financeable.
St. Paul has revised its residential zoning in recent years to allow more homes on lots that were once limited to one or two units. That has made small multi-unit infill more practical in neighborhoods such as Hamline-Midway, the North End, Como, Frogtown and the East Side, where lots come up through demolitions, tax forfeitures and city land sales.
Rules differ by district and lot size, so confirm with the city's zoning staff exactly how many units, what height and how much parking your parcel allows before you buy the land.
New construction requires plan review and permits from the Department of Safety and Inspections, and lot work may need site plan review. Minnesota's residential energy code is demanding on insulation and air sealing, and new homes in the state are built with radon control measures. Footings must sit below the frost line.
Your lender wants to see the same package: stamped or permit-ready plans, the permit or a clear path to it, a line-item budget and a builder licensed by the Department of Labor and Industry.
This example is illustrative and not a quote. An investor buys a cleared lot for $95,000 and plans a three-unit building with three-bedroom units. Hard costs are $720,000 and soft costs (design, permits, utility connections, interest reserve and fees) are $65,000, for a total project cost of $880,000.
If the loan is sized at 80% of cost, it is $704,000 and the investor contributes $176,000. When the building is finished and leased at $2,300 per unit, rent is $6,900 a month. A DSCR refinance of $715,000 has estimated principal and interest of about $4,938; with $900 of taxes and $300 of insurance the payment is about $6,138, a DSCR of about 1.12x.
| Draw stage | Share of hard cost | Amount |
|---|---|---|
| Foundation and footings | 15% | $108,000 |
| Framing and roof | 25% | $180,000 |
| Mechanical, electrical, plumbing | 20% | $144,000 |
| Insulation, drywall, finishes | 25% | $180,000 |
| Final inspection and certificate of occupancy | 15% | $108,000 |
Excavation and foundations are easiest before the ground freezes. Concrete poured in cold weather needs heated enclosures and blankets, and that cost belongs in the budget. Most St. Paul builders aim to have a project framed and closed in before December so interior trades can work through winter.
A start date in late summer can push the foundation into cold months. Set the schedule, then add a cushion to the interest reserve.
St. Paul's rent stabilization ordinance has included an exemption for newer construction, and the city has amended that exemption since the ordinance passed. Because it affects how your rents can grow after lease-up, confirm the current treatment with the city during planning, not after the certificate of occupancy.
Construction funds are released in stages after an inspector confirms completed work. Use our draw schedule calculator to map your contractor's payment needs against the stages. Collect lien waivers from the general contractor and major subcontractors at each draw; Minnesota mechanic's lien rights make clean paperwork important for your refinance title.
We usually cannot finance a project without plans or permits in process, or one where the borrower has no build history and no experienced general contractor. A lot with unresolved zoning, a budget without contingency or an owner-builder with no track record will also struggle. Fix those items first and the file becomes much stronger.
Investors who build in St. Paul usually plan to hold. New units with separate heating, modern insulation and in-unit laundry lease well in neighborhoods where most competing rentals are 100 years old, and the lower maintenance helps over a long hold. When the building is finished and leased, a DSCR refinance replaces the construction loan, sized on the rent.
Building to sell works too, especially for new single-family homes or side-by-side units in Highland Park, Mac-Groveland and near Highland Bridge, where buyers pay for new construction. Price the exit on sales of comparable new homes, not on older homes that were renovated.
Either way, decide the exit before you close. It shapes the unit mix, the finish level and how the loan is structured.
Utility connections deserve their own line in the budget. Older St. Paul blocks may need new water and sewer services from the main, and electric service upgrades for a multi-unit building can take weeks to schedule. Alley access, tree protection and boulevard restoration can add cost and time as well. Ask the city and utilities about these items before you close on the land, and carry a contingency of at least several percent of hard costs. Lenders reviewing a construction file look for that cushion, and projects without one are more likely to stall halfway through when a surprise shows up.
Send the lot address, plans, budget, builder information and your exit plan (sell or hold) through the form below, or call (877) 298-1001. We will review the project and size it on loan-to-cost. Our investor loans are business-purpose loans on non-owner-occupied property. See also our Minnesota construction loan page.
Yes. We finance 1-8 unit ground-up projects, including small multi-unit infill buildings where zoning allows them.
On loan-to-cost, with terms set per project based on the plans, budget, builder and exit.
Through a draw schedule after inspections confirm each stage of work.
You need plans and permits in hand or clearly in process. Projects without them usually do not qualify. A survey and zoning confirmation come first.
Yes, but cold-weather concrete, heating and snow add cost. Put them in the budget and schedule. Footings below the frost line and cold-weather concrete are part of every Minnesota build.
St. Paul has exempted newer construction in some form, and the rules have been amended. Confirm the current exemption with the city.
You sell, or refinance into a DSCR loan that qualifies on the leased rent.
If you have no build track record, yes. An experienced, licensed general contractor is usually required.
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