$6,000,000 Single Family Fix & Flip, Los Angeles, CA

Overview

A $6,000,000 construction loan for a single-family fix and flip in Los Angeles sits in a category most lenders quietly pass on. The ticket size exceeds the ceiling of virtually every retail hard money shop in California, and the deal mechanics, forward ARV underwriting on a luxury renovation with no in-place income, require a lender with genuine appetite for jumbo spec construction risk. Getting this one closed meant finding the right capital source, building a defensible comp package in a thin market, and structuring a draw schedule that reflected how Los Angeles permitting actually works rather than how sponsors wish it worked.

The Deal

The borrower was an experienced residential developer operating in the prime west side Los Angeles submarket. The project involved the full gut renovation of a single-family residence with the intent to resell at the trophy end of the market. The financing need was straightforward on the surface: a construction facility sized to cover acquisition basis plus hard and soft renovation costs, with draws tied to completion milestones and an interest reserve baked into the structure to carry the asset through stabilization and sale.

What made this unusual was the raw loan size. At $6,000,000, this deal needed a private debt fund or specialty bridge lender built for jumbo residential construction, not a conventional bank product, not a hard money line, and not a DSCR bridge loan. The lender had to be comfortable underwriting to a forward ARV on a property that would generate zero income between close and resale.

The Challenge

Two problems dominated the underwriting conversation. The first was proving the ARV.

At the trophy tier of the Los Angeles luxury market, genuine comparable sales get thin quickly. The temptation in any appraisal assignment is to pull from the broader "luxury" comp set, meaning anything above a certain price point in a loosely defined submarket. The problem is that those comps can understate value just as easily as they overstate it. A $10,000,000 sale in Brentwood and a $10,000,000 sale in Pacific Palisades are not the same data point. The appraisal and comp package had to be built around a small number of genuinely analogous resales: similar lot position, similar finished quality, similar buyer profile. That required working with an appraiser who understood the west side at the submarket level and could defend the value conclusion to a credit committee that had every reason to be skeptical.

The second problem was renovation risk, specifically the permitting exposure unique to Los Angeles.

LADBS timelines are not predictable. A project with hillside grading components or any coastal overlay exposure can stretch what looks like a nine to twelve month renovation scope into fifteen months or longer without any fault on the contractor's part. A lender sizing an interest reserve to the sponsor's optimistic schedule is exposed the moment the first permit takes three months instead of six weeks. The deal had to be structured to the realistic timeline, which meant sizing the reserve accordingly and tying draws to inspection milestones rather than calendar assumptions.

The third constraint was finding a capital source willing to hold $6,000,000 against a single residential asset in a market where exit depends entirely on a discretionary luxury buyer. That is a concentration of risk most institutional lenders avoid by policy. The lender had to be a private debt fund with a mandate specifically covering jumbo residential construction, comfortable with the exit thesis, and willing to underwrite to sponsor track record as a primary credit anchor.

The Solution

Commercial Lending Solutions identified a private debt fund with an established program for high-balance residential construction lending in California's coastal markets. The facility was structured as follows: a $6,000,000 construction loan at a loan-to-completed-value in the range of 65 to 70 percent of forward ARV, floating rate priced off a short-term index consistent with the bridge lending market, with a twelve to eighteen month initial term and extension optionality tied to construction progress. Draws were scheduled against defined inspection milestones with a holdback structure that protected both the lender and the sponsor's draw cadence. The interest reserve was sized to the permitting-adjusted timeline, not the contractor's pro forma, giving the sponsor a realistic runway without a forced extension conversation mid-project.

The comp package was built with a west side specific appraiser and presented to the lender's credit committee alongside the sponsor's completed project history. Underwriting anchored to track record because there was no other income stream to underwrite. The sponsor's prior completions, exit pricing achieved, and timeline adherence on previous projects carried significant weight in the credit decision.

The Outcome

The borrower closed a $6,000,000 construction facility structured to match the actual risk profile of the project, with an interest reserve sized to reality, draws tied to verifiable milestones, and a lender who understood what they were holding. The deal worked because the structure was honest about where the risk lived and the capital source was chosen to match it.