Ground up construction · California
We read the city before you buy the land.
Every ground up construction lender sells how much and how fast. None tells you whether the city will let you build what you underwrote.
1 · In one paragraph
A ground up construction loan pays for a building that does not exist yet.
So the lender is buying a plan. The city decides whether that plan is legal, and it decides before the lender does.
The loan covers part of the land and most of the build. Lenders talk in loan-to-cost rather than loan-to-value, because there is no value until the building is standing.
Money then releases in stages. An inspector confirms each stage is actually built, so you pay the trades first and recover the money second. Consequently your own cash carries every stage until the draw clears.
And the whole thing rests on one assumption nobody underwrites: that the city will allow the number of units in your model. A lender checks the build. Nobody checks the plan the build depends on.
2 · What we fund
Six kinds of build, all held for income.
If you will live in it, it is not on this list. Every one is business purpose, in California, and not yet started.
A single house to sell
One detached unit, built to sell on completion. The takeout is the sale, so the exit is priced at the start.
1 unit
A single house to hold
Built to let. The takeout is a rental loan, and the ratio it will be measured on is knowable today.
Rental exit
Two to four units
A duplex through a fourplex. Still one appraisal, still a DSCR-style takeout on the finished asset.
2–4 units
Five to ten units
Small multifamily, where the density rule usually bites hardest. This is where reading the city first saves the most money.
Up to 10 units
An infill lot in a city
A gap between existing houses. The overlay on top of the base zone is what decides the count, not the base zone.
Overlay read first
Held in an LLC
Title in an entity is normal and often preferred. A portfolio across several entities is fine too.
Entity borrowers welcome
3 · Who it is for
Four people this was built for.
Each one is buying land on an assumption that has not been checked.
The investor buying land
You are in escrow on a parcel and the pro forma assumes a unit count. That count is the thing to verify before the appraisal, not after.
The builder with a first project
Experience changes the terms and not the rules. What a first build actually needs is set out below.
The owner of a held parcel
You already own the dirt and want to build on it. The question is the same: how many units will the city let you finish.
The entity borrower
You hold title in an LLC for liability reasons. Standard here rather than an exception to argue for.
4 · The boundary
What we cannot fund, said before you ask.
You get that answer in a day, not after six weeks and an appraisal fee.
This is the work
Ground up, investment property
One to ten units, California, business purpose.
Not yet started
No ground broken, no lien recorded.
Land you own, or are buying
Either works. The parcel is read the same way.
Title in an LLC
Or in your own name.
A build another lender declined
Bring the reason. Often it is the count, not the credit.
We cannot
Construction already started
Declined, and not only by us. Lien priority is compromised and no lender can control draws from the middle.
A home you will live in
Consumer credit and a different licence.
A second home
Same reason. Referred out.
Anything needing a bank
Outside what we can broker.
Property outside California
The licence is state-specific.
5 · The unit count
Eight units becomes two, and the listing does not say so.
In West Covina the South Hills carry a Hillside Overlay. It caps density at one dwelling unit per gross acre.
Buy two hillside acres planning eight units and you get two. The overlay sits on top of the base zone, so the zoning table you checked never showed it.
6 · The fee stack
The fee you budgeted for is the last to arrive, and the smallest.
Pasadena charges a per-unit residential impact fee of roughly $17,000 to $44,000, plus a 1.92% construction tax on value.
Both land before a single permit fee is calculated. So the useful question is not what the permit costs. It is what the stack costs, in that city, this fiscal year, for that number of units.
7 · Who issues the permit
A city mailing address does not mean the city issues the permit.
65% of Los Angeles County is unincorporated. A parcel with a Santa Clarita address can sit outside the city line.
Then the County issues the permit, on County timelines and under County code — while your fee estimate, review path and schedule were all built for the city. This is knowable in one lookup, before an offer.
8 · How the loan works
Six things that are true of every ground up construction loan.
None of them is the rate. The rate is the last thing that decides whether this works.
Land, then vertical
The loan usually covers part of the land and most of the build cost. Lenders speak in loan-to-cost rather than loan-to-value, because there is no value until it is standing.
Draws against inspection
Money releases in stages, once an inspector verifies the work. Your own cash carries each stage until the draw clears, and the gap is a real working-capital line.
Interest on what is drawn
Interest accrues on the balance advanced, not the full facility. So a slow schedule costs less in interest and more in everything else.
A term with an end date
These are short. The build has to finish and the loan has to be repaid or refinanced, usually into a rental loan once the property produces income.
The exit is underwritten first
Because a lender is lending against a building that does not exist, the takeout matters as much as the build. Namely: sale, or a rental loan on the finished asset.
Entitlement is assumed, not checked
Most lenders start once the permit exists. Consequently everything on this page happens before a construction lender is even in the conversation.
Send one parcel. You get the rule, the agency and the fee stack.
No application. No credit pull. No fee. If the count does not work, you have that before the appraisal rather than after it.
8 · The questions
What we are asked most, answered short.
Each answer stands on its own. Take the one you came for.
What does it cost to have the city read?
Nothing, and it involves no application. Namely, you send the address and the parcel number, and you get the rule named back.
How long does the read take?
Days rather than weeks, because every document is already published. Still, a city that publishes nothing is itself an answer.
Can I get a ground up construction loan with no experience?
Often yes, with a stronger deposit and a licensed contractor who has a record. Therefore who you hire changes the file more than most people expect.
Do you lend your own money?
No. We are a broker, so we read the file and place it. Consequently the credit decision always belongs to the lender.
What if I already broke ground?
Then this is a decline, and it is honest to say so immediately. A mechanic’s lien can outrank the lender, and nobody controls the draws.
Which cities do you read before ground up construction loans?
Ten in Los Angeles County so far, to code level: Lancaster, Pasadena, Santa Clarita, Long Beach, West Covina, Santa Monica, Inglewood, Torrance, Glendale and Calabasas.
Send the parcel
Tell us the parcel. We will tell you the rule.
No application, no credit pull, no fee. If the answer is no, you will have it in week one rather than in month four.
- The property address
- The assessor parcel number, if you have it
- How many units you are underwriting
- Whether any work has started on site
Nothing is ordered and nothing is owed until you say so.
Primary sources, worth reading yourself: Los Angeles County Regional Planning · West Covina Development Code · Pasadena Schedule of Taxes, Fees and Charges. Wexmoor Circle LLC · 930 Colorado Blvd, Suite 1, Los Angeles, CA 90041 · NMLS #2841970 · Reviewed 13 September 2026.
12 · The long version
Ten cities, the rule in each, and what a first build needs.
Everything above in full, for the reader who wants the citations rather than the summary.
Ten cities, and the rule that bites first
| City | The rule that bites first |
|---|---|
| Lancaster | Residential is banned outright in roughly a one-mile ring around Fox Airfield — which is exactly where the cheapest land in the city sits |
| Pasadena | A per-unit impact fee of about $17,000 to $44,000, plus a 1.92% construction tax on value, before any permit fee |
| Santa Clarita | A Santa Clarita mailing address does not mean Santa Clarita issues the permit |
| Long Beach | One old oil or gas well in the wrong place can make the site unbuildable |
| West Covina | The Hillside Overlay caps density at one dwelling unit per gross acre |
| Santa Monica | Affordable housing requirements start at two units, and small for-sale projects get no fee buyout |
| Inglewood | Inside the Alquist-Priolo earthquake fault zone you pay an open-ended geology bill before a permit, and part of the lot may be unbuildable |
| Torrance | The minimum R-1 lot is 6,000 square feet or the average of neighbours’ lots within 300 feet, whichever is larger |
| Glendale | Design review must finish before you are allowed to apply for the building permit, and there is no published way to buy speed |
| Calabasas | The oak ordinance protects trees down to two inches and requires a permit merely to encroach on a protected root zone |
None of these is a ground up construction loan rule
Notice what these have in common. Not one is a lending rule. Each is a local ordinance, published, free to read, and invisible in a listing. Consequently you find them either in week one, for nothing, or in month four, after the money has moved.
Meanwhile permit expediters and lead-generation pages outrank the cities’ own documents on these questions. Therefore the version of this information most investors find is the version somebody is selling.
And we record the gaps too, where a city publishes nothing at all. A rule you cannot find in advance is a risk you price differently, which is a more useful answer than a confident guess.
How a density cap removes units
Ground up construction loans start with a unit count, so take West Covina. The South Hills is where the cheap dirt per square foot sits, and it is also where the Hillside Overlay sits. That overlay caps density at one dwelling unit per gross acre. Buy two hillside acres planning eight units and you get two.
Meanwhile nothing in the listing says so. Nothing in the zoning table you looked at says so either, because the overlay sits on top of the base zone. Consequently the arithmetic that made the deal work was never the arithmetic the city was going to run.
Notably this is not a question ground up construction loans can answer. No amount of leverage changes a density cap, and no lender will find it for you, because the lender reads the parcel after you have paid for the appraisal.
And every city has one of these. In Torrance the minimum R-1 lot is not 6,000 square feet — it is 6,000 square feet or the average of your neighbours’ lots within 300 feet, whichever is larger, and the Planning Commission sets it. In Santa Monica the affordable housing requirement starts at two units, and small for-sale projects get no fee buyout. Still, the city publishes each one, and you can read them all before you close.
What the fee stack actually contains
Pasadena charges a per-unit residential impact fee of roughly $17,000 to $44,000, plus a 1.92% construction tax on value — and both of those land before a single permit fee is calculated. So on a ten-unit project the impact fee alone can exceed the entire fee line in the model.
Therefore the useful question on ground up construction loans is not what the permit costs. It is what the stack costs in that specific city, in this fiscal year, for this number of units.
After all, a fee schedule is a published document. Reading it takes an afternoon, and it happens before you commit rather than after.
City, county, or neither
Los Angeles County Planning states the problem in its own words: residents of unincorporated areas “can be unsure which jurisdiction they belong to due to their mailing address listing an adjacent city.” And it puts a number on the scale of it — more than 65 percent of Los Angeles County is unincorporated.
So the County may issue the permit on a parcel with a Santa Clarita address, on County timelines and under County code. Yet you built the whole plan — the fee estimate, the review path, the hearing calendar — for the city on the envelope.
Still, this is knowable in one lookup, before an offer.
A first build, and what changes
Generally a lender writing ground up construction loans wants to see a build finished on time and on budget. Without one, the file leans harder on three things instead: the deposit, the contractor, and the plan.
The contractor carries most of it. A licensed general contractor with a real track record substitutes for the sponsor’s. Therefore who you hire is an underwriting decision, not only a construction one.
Then the deposit does the rest, and ground up construction loans price a first-timer on it. Expect more equity than a repeat borrower puts in, and expect the lender to want reserves after closing rather than before.
Yet none of that helps if the entitlement is wrong. A first-time sponsor who has read the city is a better file than a repeat builder who has not, because the risk a lender cannot price is the one nobody checked.
