Build to rent is a strategy where an investor or builder constructs a new property specifically for the rental market rather than for resale. The financing for this type of project looks different from a traditional flip or acquisition loan because it involves construction funding, draw schedules, and a transition into long-term rental financing. As a result, understanding how to finance a build to rent project from start to finish helps you plan each phase and avoid common funding gaps. This Playbook covers the full financing timeline for a build to rent deal.
Secure the Lot or Land First #
The build to rent process begins with acquiring the land or lot where construction will take place. Some investors purchase the lot separately, while others finance it as part of the construction loan. Key considerations for lot acquisition include:
- Whether the lot is entitled and zoned for the intended use
- Whether utilities and infrastructure are in place or need to be added
- Whether the purchase can be rolled into the construction loan
- The cost of the lot relative to the total project budget
Lenders evaluate the lot as part of the overall project feasibility. A lot that is not properly zoned or lacks access to utilities can delay or disqualify the loan.
Structure the Construction Loan to Finance Build to Rent #
Once the lot is secured, the next step is obtaining a construction loan to fund the build. Build to rent construction loans are typically short-term and interest-only during the construction phase. Furthermore, construction loan features commonly include:
- Loan-to-cost ratios up to 85 or 90 percent depending on the lender
- Up to 100 percent of construction costs funded in some programs
- Interest charged only on drawn funds during the build
- A defined draw schedule tied to construction milestones
AHL offers build to rent financing with LTC up to 87.5 percent on one-time close loans and up to 95 percent on standalone construction loans where the borrower refinances into a separate DSCR loan. In both cases, up to 100 percent of construction costs can be funded. Interest is charged only on the amount drawn, which keeps costs lower during the early stages of the project.
Understand How the Draw Process Works #
During construction, funds are released through a draw process rather than provided as a lump sum. Each draw corresponds to a completed phase of the project. Specifically, the typical draw process includes:
- The borrower or contractor completes a phase of work
- Documentation and photos are submitted to the lender
- The lender reviews the submission and verifies progress
- Funds are released for the completed work
AHL uses a digital draw process that allows borrowers to submit photos and documentation electronically, reducing delays from in-person inspections.
Transition to Permanent Rental Financing #
Once construction is complete and the property is ready for tenants, the loan needs to convert from a short-term construction loan into a long-term rental loan. This transition is sometimes called the takeout or permanent phase. There are two common ways this transition works:
- A one-time close structure, where the construction loan automatically converts to a permanent loan without a second closing
- A two-close structure, where the borrower pays off the construction loan by refinancing into a separate rental loan
AHL offers both paths. The one-time close option simplifies the process by eliminating the need for a second closing, additional appraisals, or re-qualification, with up to 87.5 percent LTC and up to 80 percent LTV on the permanent phase. Alternatively, borrowers who choose a standalone construction loan can access up to 95 percent LTC during the build and then refinance into a separate DSCR loan once the property is stabilized.
Know What Lenders Evaluate in a Build to Rent Deal #
Build to rent underwriting focuses on both the construction feasibility and the rental performance of the finished property. In particular, lenders typically look at:
- Builder or contractor experience and track record
- Detailed construction budget and timeline
- Projected rental income based on market comparables
- DSCR on the permanent loan to confirm the property can support debt service
- Site readiness, including zoning, permits, and utility access
Deals with experienced builders, realistic budgets, and strong rental demand in the target area tend to move through underwriting more smoothly.
Plan for the Full Timeline #
Build to rent projects have a longer timeline than most other real estate investments because they include both a construction phase and a lease-up phase. Therefore, planning for the full cycle helps you avoid funding gaps and manage carrying costs effectively.
A typical build to rent timeline includes:
- Lot acquisition and entitlement (if needed)
- Construction loan closing
- Active construction, typically 6 to 12 months depending on scope
- Lease-up period after completion
- Conversion to permanent financing
AHL can close build to rent loans in as little as two weeks, which helps investors move quickly once the project is ready to begin. The full construction-to-permanent cycle varies by project, but planning for 9 to 15 months total is a reasonable starting point for most single-family or small multifamily builds.
Summary #
Financing a build to rent project involves multiple phases, from lot acquisition and construction draws to permanent rental financing. When you understand how to finance a build to rent project at each stage, you can plan your budget, manage your draw schedule, and set up a smooth transition into long-term rental income. AHL offers both a one-time close option and a standalone construction loan path, giving investors flexibility to choose the structure that best fits their project and exit strategy.