BUILD

How to Start the Construction Process?

Step 1: Company

The first step is to form a company in order to obtain a construction loan through a hard money lender. To form a company you need: selecting a Name, Type of Company, Registration, Operating Agreement, Tax ID, and a Business Bank Account.

Step 2: Area

The second step is to select the area where you will do the development. This step is fundamental because the area must align with your commercial strategy depending on the type of property you intend to build and whether your goal is to keep the property, rent it out, or sell it.

Step 3: Lot

The third step is acquiring a lot—one of the more complex stages of the construction process due to possible restrictions on type of construction, zoning, or even protected species in the area. This step is key and one of the most important in the cycle.

Step 4: Model

The fourth step is choosing the model of the property you plan to build. The model selection should go beyond personal taste and should focus more on your business objectives with this investment, whether you select a single-family home, a duplex, or even a multi-family type. Everything needs to align with your budget and objectives.

Step 5: Permits

The fifth step involves filing for the permits to begin the construction process and proceed with each subsequent phase. This step is fundamental so that the lender (hard money lender) gives you the most favorable loan conditions, given that the release of funds is tied to the progress of the construction.

Step 6: Loan

The sixth step is applying for the loan from the lender (in this case, a Hard Money Lender) who provides financing for this type of project. In this phase, you leverage other people’s money to develop your construction project. It is key to find a lender that offers the best market conditions for your project.

Step 7: Construction

The seventh step involves the full construction process of the property—from clearing and leveling the land, through each construction stage, until the certificate of occupancy is obtained, which concludes this stage and allows the property to be sold or rented.

Step 8: Sale / Rent

The eighth and final step concludes the project: the property is sold or rented. Depending on your actions and choices in the previous steps, the property should deliver the best cash-on-cash return — that is, the optimal Capital Gain or Cash Flow depending on whether you sell or rent the built property

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