By KeyCrew Media
More real estate investors in New York and New Jersey are taking on construction loans instead of simple fix and flip deals, and Ruben Izgelov, CEO and Founder of We Lend, says the investors who run into trouble usually make one of the same three mistakes: underestimating the timeline, underestimating the cost, or leaning too heavily on their general contractor.
We Lend is one of the leading private lenders for real estate investors that has financed construction projects across New York and New Jersey ranging from small renovations to multi-million dollar ground-up builds. Izgelov said the mistakes he sees today are less about a bad deal and more about investors applying fix and flip habits to a project that does not work the same way.
Mistake One: Assuming The Timeline Won’t Change
A standard fix and flip loan runs six to eight months. Izgelov said investors moving into ground-up construction, condo conversions, or major extensions often keep that same timeline in their head, and it costs them.
“These projects take a lot longer to finish and exit than a typical fix and flip,” Izgelov said. “Make sure the term of your loan actually mirrors how long the work is going to take. We offer 18 month terms, and we’ve done at least one loan at 24 months, because that’s what the project needed.”
Mistake Two: Not Budgeting For How Much Construction Now Costs
Izgelov said construction budgets on deals coming through We Lend have grown from the $100,000 to $200,000 range into the $1 million to $2 million range, and in some cases the construction budget is now larger than the acquisition price.
In Deal, New Jersey, an affluent shore town, Izgelov said investors are tearing down existing homes and building new, high end single family houses for ultra high net worth buyers. The finishes alone on those projects push costs well above what a typical renovation budget would cover.
“The market has compressed. The cost of supply has increased,” Izgelov said. “Borrowers need to budget for that upfront, not discover it halfway through construction when the money is already committed.”
Mistake Three: Treating The General Contractor’s Experience As A Substitute For Your Own
Izgelov said the investors who get hurt most on larger projects are often first timers at that scale who defer almost entirely to their GC, without a plan if that contractor walks away.
“It’s highly recommended to get a completion guarantee from the GC,” Izgelov said. “Especially for borrowers who don’t have experience with a project this size, that keeps things fair. If the GC walks, they need a real reason they can defend, because the borrower shouldn’t be left holding a half finished building.”
Match The Project To The Market
Izgelov’s broader advice is to let the neighborhood, not the trend, set the scope of a project. “If there’s demand for a project of that size or caliber, great,” he said. “But don’t build something a neighborhood can’t support just because that’s what other investors are doing right now.”
He said We Lend’s own underwriting follows the same rule: the firm only lends in markets it knows well enough to judge whether a project actually fits, which he said is a bigger factor in avoiding a bad construction loan than any single budget line.
More on how We Lend structures construction financing is available on the company’s How It Works page.
About We Lend: We Lend is a private direct lender providing fast, flexible financing for real estate investors across New York and New Jersey, including acquisition, renovation, and ground-up construction loans. Learn more at welendllc.com.
Disclaimer: This article is intended for informational purposes only and does not constitute legal, financial, or investment advice. The views and opinions expressed herein reflect those of the individuals quoted and do not represent an endorsement of any company, product, or service mentioned. Readers should conduct their own due diligence and consult qualified professionals before making any investment decisions
