The lot is worth more than the house sitting on it. The neighborhood has turned over. Every comp within four blocks is a new build at 1.7× the old stock. You can see the play — you just need the financing mechanism that closes before someone else buys the lot.
Infill Tear-Down Rebuilds — The Investor and Move-Up Buyer Angle
On strong infill lots, the math is straightforward: lot value + new-construction cost produces an as-completed value that beats comps at a margin wider than typical new-construction deals. The limit isn't the math. It's the financing — most lenders won't finance a tear-down at all, let alone one on an investment property, let alone one where the investor wants to move in post-build or hold and rent.
Through NEXA Mortgage's wholesale OTC program, tear-down rebuilds are eligible for:
- Primary residence (most common)
- Second home
- 1-unit investment property (conventional OTC, additional reserves)
- Jumbo OTC tear-down (higher-value infill markets)
The Underwriting Difference — Primary vs Investment Tear-Down
- Down payment / lot equity. Primary: 5–10% combined (cash + lot equity). Investment: 15–25% combined, depending on reserves.
- Reserves. Investment tear-downs typically require 6–12 months PITI post-close.
- Rate pricing. Investment pricing is higher than primary-residence pricing — budget accordingly when modeling the exit.
- Rental income. Projected rental income on a 1-unit can be used with a signed lease or market-rent appraisal (1007).
Draw Schedule Visualizer
Model how your construction budget disburses across draws.
| Draw | Amount | Cumulative | % |
|---|---|---|---|
| Draw 1 (close) | $0 | $0 | NaN% |
| Draw 2 | $0 | $0 | NaN% |
| Draw 3 | $0 | $0 | NaN% |
| Draw 4 | $0 | $0 | NaN% |
| Draw 5 | $0 | $0 | NaN% |
| Draw 6 | $0 | $0 | NaN% |
| Draw 7 | $0 | $0 | NaN% |
| Draw 8 | $0 | $0 | NaN% |
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Draw Schedule for a Tear-Down Rebuild
The calculator above visualizes a typical 6-draw schedule for a tear-down rebuild. Draw 1 usually covers demolition + site prep. Draws 2–5 map to framing, rough-in, drywall/finish, and trim. Draw 6 is the final close-out that triggers CO and permanent-mortgage conversion. Each draw is triggered by a builder pay app (AIA G702/G703 format) and often an on-site inspection.
Pitfalls Investors Specifically Run Into
- Over-forecasting finished value. Appraisers comp conservatively. Budget from the low side of comps, not the aspirational side.
- Under-budgeting carrying costs. Interest-only during a 9-month build is still 9 months of expense. Use the interest-only payment calculator to model it accurately.
- Ignoring insurance during demo. Vacant-home / demolition coverage is a separate policy and often missed by investors used to rental policies.
- Skipping environmental due diligence. Infill lots in older neighborhoods can surface prior USTs, fill-dirt contamination, or adjacent-property liability.
Related Reading Path
- Tear-Down Rebuild — Consumer Guide
- Land Owner Construction Loans (Broker Angle)
- Custom Construction — Architect-Led
- OTC Construction Loan product page
- OTC Calculator Suite
Talk to an OTC Construction Specialist
Tell us about your project. A Homestead Capital Partners construction-loan specialist (routed through NEXA Mortgage's wholesale lender network) will review your scenario and return with program fit, rough timeline, and the documents needed to move forward.
Homestead Capital Partners NMLS #2587985 | NEXA Mortgage LLC NMLS #1660690 | Licensed in 47 states (excluding NY and GA). Equal Housing Lender. Content is informational and not a commitment to lend. All loan approvals are subject to underwriting, appraisal, title, and credit review. Program features, eligibility, down-payment, reserve, and LTV requirements are verified against United Wholesale Mortgage (UWM) product guides and Reveal Lending non-QM guidelines. Not all applicants will qualify. Rates, points, and terms are not quoted in this article and require a written loan estimate under TILA/Reg Z prior to application.