New York real estate investors are increasingly abandoning the traditional fix-and-flip model in favor of larger construction projects, according to Ruben Izgelov, CEO and Founder of We Lend, a private direct lender based in New York. The shift reflects compressed returns on cosmetic renovations and rising costs, pushing investors toward ground-up construction, condo conversions, and building extensions that require significantly more capital and time.
Izgelov said that the company, historically known for financing quick-turnaround fix-and-flip loans, now sees a growing share of its loan volume going to construction projects with budgets ranging from $1 million to $2 million, up from the $100,000 to $200,000 range typical of standard renovations. In some cases, the construction budget now exceeds the purchase price of the property itself. “Our borrowers’ returns have been compressing,” Izgelov said. “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.”
We Lend, which funds loans across New York and New Jersey, manages the increased risk of larger projects by requiring documentation that many lenders skip. Before financing a conversion or extension, the firm requires an architect’s letter confirming the work can proceed as of right without rezoning or variance applications. For larger jobs, the company requires general contractors to sign completion guarantees, ensuring they are committed to finishing the project. “That keeps the playing field level between the borrower and the GC, especially when the borrower hasn’t worked at this scale before,” Izgelov said.
Two recent deals illustrate the range of projects We Lend now finances. In one, a borrower purchased an eight-unit bank-owned property that previous lenders declined to improve. We Lend financed the conversion of that building into 16 fully leased units, and the borrower is now in discussions with banks about a refinance to return equity for the next project. In another deal in an affluent New Jersey suburb, a borrower was nearing completion on a 22,000-square-foot spec home when a lot line sale required paying off an existing private loan. We Lend restructured and refinanced that loan, providing payoff funds and a small cash infusion to finish construction.
Izgelov cautioned that the biggest miscalculation fix-and-flip investors make when moving to larger projects is underestimating the timeline. While typical fix-and-flip loans run six to eight months, 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. “Built-in extension options with your lender help, or better yet, start with a term longer than 12 months. We offer 18-month terms, and we’ve done at least one loan at 24 months.” He also advised against building to a trend rather than to demand, warning that constructing a mega mansion in a neighborhood that cannot support it is a risk.
For investors considering this shift, understanding the lender’s requirements and planning for longer timelines are critical. More information on how We Lend structures its loans is available on the company’s How It Works page.
