What Is a Build to Rent Loan and How Does It Work? #
A Build to Rent loan is financing designed for investors who are constructing properties specifically to hold as rentals. Instead of treating construction and permanent financing as two separate steps, this type of loan combines both phases into a single transaction. That means the loan funds the ground-up build and then transitions into long-term financing once the project is complete.
Key Features of a Build to Rent Loan #
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One-time-close structure that covers both construction and permanent financing
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Up to 87.5 percent loan-to-cost, with up to 100 percent of construction costs funded
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Interest-only payments during the construction period
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In-house takeout financing that avoids the need for a second closing
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Typical closing timelines of two to three weeks, faster than many traditional lenders
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Designed for investment properties, not owner-occupied homes
How It Works #
At closing, funds are allocated for both the land purchase (if applicable) and construction budget. Like a traditional construction loan, money for the build is released in draws tied to milestones such as foundation, framing, and final completion. Each draw requires an inspection to confirm progress. Once the project is finished, the loan automatically converts into permanent financing without requiring a second closing, new underwriting, or duplicate fees.
Why Investors Use Build to Rent Loans #
For investors developing rental communities or single-family homes to hold in a portfolio, Build to Rent loans provide speed and efficiency. The one-time-close structure reduces costs by avoiding multiple closings. In-house takeout financing ensures a smoother transition, giving investors certainty about their exit before construction even begins. This combination of flexibility and predictability makes Build to Rent loans a valuable tool for long-term real estate strategies.
Summary #
A Build to Rent loan finances both the construction and permanent phases of a rental project in a single closing. By streamlining funding, reducing costs, and securing takeout financing upfront, it gives investors the stability they need to scale Build to Rent strategies efficiently.