In the District, new small-scale construction usually means a rowhouse or a two- to four-unit flat building on an infill lot, or a small apartment building in a neighborhood zoned for it.
In short: LendingStreet finances ground-up construction in Washington, DC for investors building 1 to 8 units, including new rowhouses, two- to four-unit flats and small 5-8 unit buildings. Loans are sized on loan-to-cost with terms set per project, and funds are released through inspected draws. Zoning limits, historic review, high closing taxes and DC's tenant laws are the local issues that shape a District project.
Infill projects appear in Petworth, Brightwood, Brookland, Eckington, Trinidad, Congress Heights, Deanwood and parts of Ward 7 and 8, where lots or older homes can support new rowhouses or flats.
Strong rental demand from federal workers, contractors, universities and hospitals supports new units. Condo-style flats are also sold individually in some projects.
Flats built for sale as condominiums need a condo regime, documents and registration with the District, which adds time and legal cost. Investors who plan to rent and refinance avoid that step, but must make sure the rent supports a DSCR loan on the whole building. For 5-8 unit buildings, maximum leverage on the refinance may be lower; it varies by program. Decide which exit you are building toward before you design.
Common DC 1-8 unit projects: Each type has its own exit and its own local issues.
| Project type | Where it is common | Local note |
|---|---|---|
| New rowhouse | Brookland, Trinidad, Congress Heights | Sale or rental exit |
| Two- to four-unit flat | Petworth, Brightwood, Eckington | Rental or condo sale exit |
| Small 5-8 unit building | Corridors zoned for apartments | Larger review |
| Detached single-family | Wards 4, 7 and 8 | Sale exit |
Building permits now run through the DC Department of Buildings. Zoning is set by the DC Zoning Regulations, with relief through the Board of Zoning Adjustment. Many neighborhoods are historic districts, where the Historic Preservation Review Board or its staff review design.
DC's deed recordation and transfer taxes are significant on both purchases and new loans. Get the figures from your title company early.
Inclusionary zoning can apply to some new residential projects in DC, generally larger ones, and requires a share of affordable units. Most 1-4 unit projects fall below the threshold, but confirm whether it applies to a 5-8 unit plan before you set rents.
DC rent stabilization generally does not apply to buildings built after 1975, but confirm how it applies before you lease. The Tenant Opportunity to Purchase Act can give tenants rights when a tenant-occupied building is sold, which affects a sale exit after leasing. Utility connections through DC Water and Pepco can add time.
Construction loans are sized on loan-to-cost (LTC): the loan as a share of the total project budget, including land, hard costs, soft costs and contingency. Terms are set per project, so the percentage depends on the plans, the budget, the location and your experience.
The finished value matters too. A Washington, DC budget that works on cost but leaves little margin against the expected sale price or appraised value will usually be sized down, because the exit has to work.
This example is illustrative and not a quote. An investor builds a four-unit flat building in Brookland to hold as a rental. Land costs $650,000, hard costs are $1,400,000, soft costs are $220,000 and the contingency is $80,000, for a total project cost of $2,350,000.
At a sample 75% loan-to-cost, the loan is $1,762,500 and the investor puts $587,500 into the project. Most of the loan funds through draws as work is completed.
Once the four units lease for a combined $11,600 a month and the property appraises at $2,600,000, a DSCR refinance at 75% LTV would be $1,950,000, enough to repay the $1,762,500 construction balance. The rent then has to cover the new payment, including taxes and insurance, at the program's DSCR minimum.
| Item | Amount |
|---|---|
| Land | $650,000 |
| Hard construction costs | $1,400,000 |
| Soft costs (plans, engineering, permits, fees) | $220,000 |
| Contingency | $80,000 |
| Total project cost | $2,350,000 |
| Loan at a sample 75% LTC | $1,762,500 |
| Investor cash in the project | $587,500 |
| Monthly rent at completion | $11,600 |
| Completed value | $2,600,000 |
| DSCR refinance at 75% LTV | $1,950,000 |
Each draw follows an inspection. When a stage is finished, you request funds, an inspector verifies the completed work and the money for that stage is released to keep the job moving.
A draw schedule that matches the real sequence of a Washington, DC build avoids cash gaps. Front-loaded schedules and vague line items slow approvals, so tie each draw to work an inspector can see.
A complete package gets a faster, clearer answer. Lenders generally pass on projects without plans or permits, and on borrowers with no build track record and no experienced general contractor.
If you are newer to building, pairing with a general contractor who has finished similar Washington, DC projects can make the difference. Their resume, licenses and recent projects become part of your file.
Every construction loan needs a clear exit. Spec builders sell the finished property. Build-to-rent investors lease it up and refinance into a DSCR loan that qualifies on the property's rent, with no W-2s or tax returns, a 620 minimum credit score, LLC borrowers standard and 30-year terms available.
If a sale takes longer than planned, a leased property can still refinance into a DSCR loan, so it helps to design a home that would also rent well in Washington, DC.
Our investor loans are business-purpose loans on non-owner-occupied property. Send your Washington, DC plans, budget and land details through the form below, or call (877) 298-1001, and we will come back with how the project can be sized.
Yes. We finance investor construction of rowhouses, flats and small 5-8 unit buildings across the District, subject to plans, permits, budget and builder experience.
DC rent stabilization generally does not apply to buildings built after 1975, but confirm before you lease.
The Tenant Opportunity to Purchase Act can give tenants rights when a tenant-occupied building is sold. If you may sell after leasing, review TOPA first.
DC's recordation and transfer taxes are higher than in many places. Include them in the budget.
Through a draw schedule. Each stage of work is inspected before funds for that stage are released.
Yes. Once the property is leased, a DSCR loan can pay off the construction loan, qualifying on rent with 30-year terms available.
No. Our investor loans are business-purpose loans on non-owner-occupied property.
In most cases, yes, or approved plans with a clear path to permit. Projects without plans or permits usually do not qualify.
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