New York private lender We Lend is seeing a significant shift in its loan volume as real estate investors move away from traditional fix-and-flip projects toward larger construction loans, according to CEO and founder Ruben Izgelov. The company, historically known for financing quick-turnaround fix-and-flip loans in New York, now reports that a growing share of its business involves ground-up construction, condo conversions, and vertical and horizontal building extensions.
“The general fix and flip model doesn’t work as much as it used to, so investors have had to get creative, and that requires heavier, more substantial construction and rehab work,” Izgelov said. He noted that construction budgets on deals 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 now exceeds the property’s purchase price.
This shift reflects the changing math of real estate investing in the New York area. Rising costs and tighter margins have compressed returns on standard fix-and-flips, where investors typically put $50,000 to $100,000 into cosmetic work before reselling. To maintain profitability, investors are taking on more complex projects that require larger capital outlays and longer timelines.
We Lend, which is backed by the entire capital stack and makes all underwriting and funding decisions in-house, has adapted its lending criteria accordingly. For larger construction projects, the firm requires an architect’s letter confirming the work can proceed as of right, without rezoning or variances. On major jobs, general contractors must sign completion guarantees, ensuring their commitment to finishing the project without personally guaranteeing the loan.
“We want GCs committed to the project just as much as the borrower is,” Izgelov said. “That keeps the playing field level between the borrower and the GC, especially when the borrower hasn’t worked at this scale before.”
Two recent deals illustrate the range of projects We Lend now finances. In one, a borrower purchased an eight-unit bank-owned building that a previous lender had declined to finance improvements on. We Lend funded the conversion into 16 fully leased units, and the borrower is now in discussions with banks for a refinance that would return equity for the next project. In another deal in an affluent New Jersey suburb, a borrower was 85 percent finished building a 22,000-square-foot spec home when a lot line sale required paying off an existing private loan. We Lend restructured and refinanced the loan, providing the payoff and additional funds to complete construction.
Izgelov cautioned investors moving into larger projects to budget carefully for longer timelines. A typical fix-and-flip loan runs six to eight months, but ground-up construction and major conversions often take much longer. “Budget carefully for the interest that has to be paid over that term,” he said, recommending built-in extension options or starting with a term longer than 12 months. We Lend offers 18-month terms and has done loans at 24 months.
He also warned against building to a trend rather than demand. “If there’s demand for a project of that size or caliber, great. But don’t build a mega mansion in a neighborhood that can’t support it just because that’s the trend.”
More information on how We Lend structures its loans is available on the company’s How It Works page.
