Build out on a Rehab Condo Project

Board Topic: Build Out LTV -What is Build Out LTV Based On?
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Build Out LTV

Posted by: Jim Aug 2 2004, 12:59 PM
When a Lender says they will offer 135% of build out on a Rehab Condo Project, what do they mean? This is a conversion of an existing building into condo units. Project cost is estimated to be 1.5 M

Posted by: loanuniverse Aug 2 2004, 01:27 PM
Build out in construction terms usually refers to the costs associated with making the changes to the building so that the space is tenant ready. I have seen the term “build out” associated mostly with commercial office building construction when they are referring about the internal partitions and specific floor plan layouts to meet incoming tenant needs.

It is easier to understand if you look at the project as having two components.

A component for the construction or acquisition of the building “shell”, and a secondary component for the improvements to get the space ready or “build out”. The lender is only interested in the global loan-to-value number and they might be willing to finance 100% of the “build out” if there is already substantial equity in the building to begin with. I have never heard of someone financing more than 100%, but I guess we are really talking more marketing than actual number crunching.

Looking at a request like this, the lender should be concerned with two loan-to-value numbers when looking at the collateral.

1- What level of loan-to-value am I going to be at when I close the loan on the apartment building? “as is”

2- What level of loan-to-value am I going to be at when construction is finished? “as completed”


Telling you that “coming with us, you will get 135% financing” sounds to me like salesman doublespeak. It might be a way to shift attention to a higher loan-to-value at closing.

Posted by: jim Aug 2 2004, 01:42 PM
Thanks for the help....I will get the Lender to further qualify what they are offering....
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