Hard money lender in Houston, TX.

I am a hard money lender in Houston, and the deal that defines this city is a tired bungalow on a full lot inside or near the Loop, bought for the dirt and replaced with two or three new townhomes. Next to that you will find straight cosmetic flips on postwar ranch houses, rentals bought for the yield, and the occasional builder putting a single new house on a lot in a part of town that has not seen one in decades.

Houston is unusual among big American cities because it has no conventional zoning. That sounds like freedom, and for a builder it often is, but the work that zoning does elsewhere is done here by recorded deed restrictions, by the city's lot and setback rules, and by a floodplain map that got a lot more serious after Harvey. A Houston file is decided by those three things long before anyone argues about the finish schedule.

I am a private money lender, so one person reads your file and one person gives you an answer with the reasoning attached. Below I cover the neighborhoods where investor activity is easy to see, what actually trades, the local rules that move the numbers, and how fix and flip loans in Houston, DSCR loans in Houston and new construction loans in Houston work on a real property with a real deadline.

The signature Houston deal is the lot play. A builder buys an older house on a full-size lot close to downtown, demolishes it, and puts two or three new townhomes on the same ground. Houston lets an urban lot be split into smaller lots through the platting process, and that is what makes the math work. My questions are whether the replat is realistic for that parcel, whether a deed restriction limits the number of homes or the type, and whether the site sits in a mapped floodplain that will raise the slab and the budget.

Straight flips are the second category. Postwar ranch houses on slab foundations and older pier and beam bungalows trade all over the city. On slab houses, the questions are plumbing under the slab, foundation movement in the clay, and a roof and HVAC system that has fought the Gulf humidity for years. On pier and beam houses, it is leveling, rot and what the crawlspace looks like after the last big storm.

Single-family rentals are the third. Houston rents well relative to its prices, so newer homes and solid older ones get bought to hold, both as single purchases and as a second step after a rehab. The math on these has to include property tax and insurance at their real current cost, which in this market can decide whether a rental covers its debt.

Last is the single new house on a large lot, which shows up more in neighborhoods like Acres Homes and on the outer edges of the Loop where land is cheaper and lots are wider. These are simpler builds but they lean harder on the appraisal, because comparable new construction nearby can be thin.

Houston does not have conventional zoning. There is no map telling you a block is single-family only. What there is instead is a patchwork of recorded deed restrictions, written into subdivision plats and neighborhood covenants, and the City of Houston itself helps enforce many of them through its Legal Department. Some neighborhoods have none, some have restrictions that expired, and some have restrictions that limit a lot to one single-family home and say so plainly. A neighbor or civic association can complain, and the city can take a violator to court.

That is why I want a title commitment and a read of the restrictions before the contract goes firm, not after demolition. A townhome plan on a lot restricted to one detached house is not a construction loan, it is a lawsuit. The same check also catches building lines and minimum lot size rules that a replat would have to satisfy.

The second half of the wrinkle is water. After Harvey, the city tightened its floodplain rules so that new buildings and substantial improvements in mapped floodplains, including the wider 500-year floodplain, have to be built with the floor elevated above the flood elevation for that site. On a new build that means a raised slab or a pier foundation, more fill rules, more engineering and a higher budget. On a heavy rehab it can mean the scope crosses the substantial improvement line and the existing house suddenly has to meet new construction standards.

So the two things to check before the deal is firm are the flood zone and elevation for the exact parcel, and whatever restrictions are recorded against it. Both are free or cheap to look up early and expensive to discover late. I would rather size a loan on a budget that already includes the elevation and the right number of homes than on a pro forma that has to be rewritten in month two.

Fix and flip loans in Houston fund the purchase and the rehab in one facility, with the rehab released in draws as each phase of work is finished and inspected. On a Houston slab house, the early draws usually cover the foundation repair, the under-slab plumbing and the roof, because those are the line items that move the budget and the appraisal most.

I set the after-repair value from renovated sales in the same subdivision, since Houston prices can change sharply across a bayou, a freeway or a deed-restricted boundary. If the house is in a mapped floodplain, I also want to know how big the scope is relative to the house, because a large enough rehab triggers the elevation rules. You get a written term sheet in 24 to 48 hours and closing in 5 to 10 days subject to title. Pricing is set per deal and written into the term sheet.

How fix and flip loans work

DSCR loans in Houston are sized on what the property rents for, so I do not ask for tax returns or W2s. I ask for the lease or a credible market rent, the property tax bill and an insurance quote that matches the flood zone. Taxes and insurance are heavier carrying costs here than in many markets, and a rental that looks great on rent alone can look thin once both are in the payment.

These close in 14 to 21 days. They suit newer townhomes bought to rent, solid older houses that are already leased, and the refinance at the end of a flip or build that turned into a hold. Pricing is set per deal and shown in the term sheet, and a loan sized on honest expenses is the one that survives the appraisal.

How DSCR loans work

New construction loans in Houston combine the land and the vertical build in one facility, which fits the way infill works here: a builder buys an older house or a vacant lot and goes straight to plans, replat and permit. Loans for this run from $150K to $1M+, so a single house on a wide lot and a small row of townhomes both fit.

I review the contractor bids and the line-item budget before closing. For Houston that budget needs the demolition, the foundation as engineered for the soil, any elevation the floodplain rules require, drainage and detention where the city requires it, and the utility taps. Draws follow the schedule of values and are released as inspected work is completed. Construction loans close in 10 to 14 days once the file is complete, and a confirmed deed restriction review and a clear flood determination make that file complete much faster.

How construction loans work

A bridge loan is how a Houston BRRRR gets started. You buy an older house, fund the purchase and the rehab with me, lease it once the work is done, and then refinance into a DSCR loan with the same lender. The refinance is underwritten on a project I already watched get built, which removes much of the friction of explaining the deal to someone new.

The bridge also suits a builder who wants to hold one townhome out of a row and sell the rest. Plan the exit at the start: which units sell, which one gets leased, and what rent and expenses the refinance will be sized on. Pricing is set per deal and stated in writing on the term sheet.

How the BRRRR bridge works

Before the contract firms, the lot needs a deed restriction review confirming two homes are allowed and a flood determination for the parcel. If the site is inside a mapped floodplain, the slab height and the budget both change.

The replat adds time before vertical work can start. A schedule that assumes permits in a few weeks will run long, and the carry on a vacant lot is cost with no return.

New townhomes in this part of town compete with each other. The sale price that matters is the one comparable new homes are actually closing at, not the asking prices on the block.