Unlock Your Dream Home: Top 5 Ground-Up Construction Loan Tips

John Harcar (00:01.894)
All right. Hey, guys, welcome back to our show. I’m your host, John Harcar, and I’m here today with Everett Brunelle. And what we’re going to talk about is besides his journey in business, real estate and mortgage, we’re going to talk about ground up construction loans, something that he’s really focusing in and specify or has a specialty. And I guess you could say, remember, guys, at Investor Fuel, we help real estate investors, service providers, really all real estate entrepreneurs, two to five extra business.

by providing tools and resources to grow the business they want, which helps them in turn live that life they want to live. So Everett, welcome to our show,

Everett Brunelle (00:39.161)
Thanks, John. Thanks for having me. I appreciate it.

John Harcar (00:41.65)
Yeah, look forward to talking about ground up. know a lot of our folks that are at our mastermind have been talking about ground up stuff, but before we get into all that, you know, I like to, to have, you know, our guests talk about, you know, their background a little bit, you know, how they got into business, you know, real estate, your case, maybe mortgage lending and, kind of what brought you to today.

Everett Brunelle (01:01.036)
Yeah, most definitely. So I’m born and raised in California. As of the recent years, moved out to Texas. But we came here with a purpose since my wife was getting a master’s at TCU. And when I was in California, I was selling solar and it was a perfect time because I wanted to get out of solar and how I got into the industry was just on LinkedIn looking around for jobs and just…

applying left and right a hundred jobs and finally something stuck and I didn’t really understand what the job was and I didn’t really understand, you know, the description wasn’t the greatest. But, you know, my interviewer said that, it’s going to be in real estate. And I said, hey, real estate. mean, that’s the most amazing thing that you can you could possibly do. Didn’t want to be a real estate agent. Didn’t want to sell homes.

So I said, hey, let’s just figure this out. And then it ended up being real estate lending for investors, something that I had to do what it was. So I basically started my first day and I started kind of understanding, okay, we’re lending to people who are fixing and flipping properties, who are building homes, who are buying rentals, things like that.

John Harcar (01:56.4)
cool.

Everett Brunelle (02:11.424)
And ever since then, I’ve just absolutely fallen in love with the industry, knowing the financial sides, how to run numbers, run deals, things like that. And then, yeah, fast forward to a couple years later, I’ve got my own team within our company. And yeah, we’re just very focused on ground-up construction, as you said.

John Harcar (02:30.717)
Okay, well cool. Before we kind of start talking about where we’re at today and the company and all that stuff, I like to always go back. If you ever watch any of my podcasts, I like to ask this question. You know, was there any influence, any exposure or anything, know, anyone in your life, maybe that was doing real estate in the past that maybe sparked to that little bit of interest, maybe planting a little seed. Cause you said it was, you you said, yeah, real estate is a great, great thing. So was there, is that something that you would kind of had?

Exposure to before?

Everett Brunelle (03:02.732)
Yeah, yeah, yeah. I had tons of exposure. My dad was a real estate appraiser in the Palm Springs area for 20 years. He was the most well-known appraiser in that area. So I’ve seen a lot of real estate. My dad owns properties. He owns all that stuff. We’ve always talked about doing a joint venture. By the time that I got to the age that I could actually invest, he was already done. And he said, you do it on your own kind of thing.

John Harcar (03:14.278)
Awesome.

John Harcar (03:21.895)
Okay.

John Harcar (03:29.585)
Yeah

Everett Brunelle (03:30.35)
And he’s on, you know, he’s sitting pretty right now, just living life off of his rental properties. So yeah, now he’s like, I don’t want to do this anymore. I’ve done it for too long. So I’ll help you. I’ll give you some pointers, but I’m not going to do any more deals or anything. I don’t need to. So yeah, just put it all out on my own. But yeah, my dad was a big influence.

John Harcar (03:53.746)
and then you were doing solar, you were selling solar, like what kind of things did you pull from solar that really helped you in your career where you’re at now?

Everett Brunelle (04:01.998)
Sales really. Door to door is probably one of the hardest ways to sell somebody. You’re taking somebody who’s maybe not interested or not educated on a product, you’re teaching them, and then after you’ve taught them, then you have to sell them. So it’s a pretty hard industry. So a lot of it is networking, connecting with people, selling. So yeah, definitely with the lending world and we’re selling loans, but also there’s so many lenders out there.

John Harcar (04:06.785)
yeah.

Everett Brunelle (04:32.536)
personality and network definitely helps win that gauge because we have, know, all of our competitors do the same exact thing. Really nobody’s special, nobody does anything crazy or different or super amazing. You know, maybe you have like one or two things that’s minor, but a loan officer that’s working with you that actually cares about you, that is connecting with you, that is talking to you.

That’s the biggest thing that I’ve learned from solar for sure.

John Harcar (05:02.973)
Did you have any specific sales education that you relied on or that you were, you know, you kind of, they shared with you the company that you’re working for or whatever, like something that was kind of your guide into how to approach and talk to people.

Everett Brunelle (05:16.238)
in solar or as of today?

John Harcar (05:18.807)
anything in any of them. mean, I guess probably back in solar how it kind of how it built your skills.

Everett Brunelle (05:25.206)
Yeah. So mean, in solar, started at a, at a startup really. So there was the two owners and me and my buddies, like we were all of his sales rep. So really we didn’t have any like guides. gave us a little pamphlet and they said, let’s go talk to people and try to sell them solar. And if you can set an appointment, then we’ll have a real closer come in and sell them the appointment. so it was kind of like, learn the lingo, set appointments, sit in on the appointments while it’s being closed. And then you can start closing on your own.

John Harcar (05:37.649)
just here go talk to these people.

John Harcar (05:45.65)
Nice.

Everett Brunelle (05:55.042)
They had some sales training, they had some people that, you know, they brought in some big door-to-door sales guys who are super good to teach us and stuff, but it’s really learn as you go and then also putting in some time on your own time to learn how to sell, learn how to network, learn how to do all those things to be successful. You know, if I just sat around waiting for someone to teach me or waiting for something to come across my desk and yeah, I wouldn’t be where I am today.

John Harcar (06:19.965)
Yeah.

Well, that’s some of the biggest experience too is just getting out there and doing it. Learn trial by fire, get thrown into the wolf. All right, so you moved to Texas, you find this job on LinkedIn for a lending company that lends to real estate agents. Tell us about some of the struggles that you dealt with when you got into the lending business.

Everett Brunelle (06:28.206)
100%.

Everett Brunelle (06:41.774)
Yeah, so I was at a brokerage, so we didn’t have our own money. So it was, you know, find the investor and then connect them with our lending platform of all direct lenders. So the big struggle was really understanding first all of the leverage lingo and all the real estate lingo, know, loan to cost, loan to value, ARV, you know.

debt ratio, learning all that stuff was a learning curve. And then from there, then it was learning all about, okay, who or what lender is going to be a best fit for this investor as well. Because some lenders care about credit score, some lenders don’t. Some lenders want you to have maybe eight months of interest reserves for the monthly payments. Some lenders say six months. Some lenders are gonna charge you a lot on their origination costs, but give you very high leverage.

and some will give you less leverage and charge you less. So it’s really figuring out what does the customer want and then who fits that lender the best and then providing that kind of a middleman.

expertise on, okay, this is your lender, this is who you’re gonna wanna go through because YZ. So yeah, and I mean, there’s tons of lenders out there. Thankfully, we narrowed it down to like eight of them that we used mainly. But yeah, that was definitely a learning curve for sure.

John Harcar (08:04.685)
And are you still with that company now? Same company? Okay. So how…

Everett Brunelle (08:07.254)
I’m not, no, yeah. So basically knew, I knew that it was a good company. It was a great company to start at. Got my feet wet into the industry, helped me learn that, okay, I actually like this. This is really cool. I get to see the financial side of it. Now it’s kind of time to part ways. Now I’m at a direct lender. We own our own capital. You know, we’re privately held by and backed by a New York hedge fund.

John Harcar (08:14.236)
Hmm.

Everett Brunelle (08:34.698)
and I’m at a company that we do over $2 billion of loans each year. Yeah.

John Harcar (08:40.113)
Awesome. What are some of the trends that you’re seeing now? Like, is there more like of a lot more DSCR coming down, know, people getting mad, are there more, I mean, what kind of trends are you seeing in the lending world today?

Everett Brunelle (08:55.082)
So we stay up to date, very up to date with our DSCR loans. They’ve kind of slowed down as of these last couple of weeks due to the tariffs. The volatility and the rates have just been up and down and left and right. So a lot of less people maybe.

John Harcar (09:06.333)
Everett Brunelle (09:13.646)
wanting to lock in their rate of what they see now because they think it’s either gonna they don’t know what’s really gonna happen. So we’re seeing a little bit more of bridge loans just you know a little bit of a higher interest but there is no prepay penalty there is no you know anything holding them down and it’s you know they can get 12 to 24 months so they’re willing to pay a little bit higher to not get stuck and pay a penalty.

So we see that or, you know, people just buy down or buy out their option in the DSCR because a standard is a five-year prepay penalty. You can get that down to a four, three, two, one, or even none. It’ll just affect your interest rate. So even if someone does a DSCR loan in today’s, you know, days with, you know, the whole tariffs and everything, it’s usually going to be a 0 % and then…

they’ll take the higher interest rate to not lock them in at a 8 or 9 % rate for when it drops a little bit more, then they’ll go in and relock it.

John Harcar (10:12.507)
and just for people that might not be on or might not know that are on here listening. What is DSCR?

Everett Brunelle (10:17.762)
So DSCR stands for Debt Service Covered Ratio. And it’s really basically that 1 % rule that every real estate investor talks about is, hey, does it meet, you know?

John Harcar (10:21.469)
And how is that figured out?

Everett Brunelle (10:30.734)
If you’re buying a property for X amount, does it meet that 1 % rule in the rents? So for example, you buy $100,000 house, does it rent for at least a thousand bucks? To be able to cover all of the debts that are associated with it. So your principal interest, taxes, insurance, things like that.

John Harcar (10:49.245)
All right, so you’re at this new company. What is your business, your team, what does all that look like now? Tell us a little bit about that before we go into what our topic of ground construction stuff was.

Everett Brunelle (10:59.318)
Yeah, so, and I mean, I can roll right into it. You know, we’ve got a team of territory managers where we’re all guys who are in their market, right?

Companies are just going to have your headquarter. Everybody’s in there. It’s kind of gives you a call center vibe. Everyone just dial in, trying to connect with people. Us as territory managers, we’re actually in our markets. We’re going to real estate meetups. going to, you know, we’re doing podcasts, things like that. Just really exposing ourselves into the marketplace. So I think we’ve got a, got about 10 guys on our team ranging from West coast to East coast.

John Harcar (11:34.044)
Okay.

Everett Brunelle (11:37.376)
Southern belt, things like that. yeah, what I focus on and everybody brings kind of their own cup of tea or what they like to the table. I specifically focus on ground up construction because I’m here in Texas and it’s something that’s absolutely booming. While, you know,

John Harcar (11:53.659)
Why is it booming? Why do you think it’s taking off so much?

Everett Brunelle (11:57.344)
It’s because everybody’s moving here. Well, I guess I shouldn’t say everybody, but a lot of people are moving here, right? Texas, we just crossed 30 million people in population. It’s insane. All the big cities, San Antonio, Houston, Austin, and DFW, Dallas, out of the top 10 places that people are moving to and building,

John Harcar (12:04.669)
That’s a country dude.

John Harcar (12:17.767)
DFW,

Everett Brunelle (12:26.632)
Dallas is or sorry not Dallas, but all of the Texas cities are in there. So What is that San Antonio Houston Austin? That’s four of the top ten are in Texas, right? And when people are coming from out of state their money is going further, right? So for example, lots of Californians are coming to Texas They’re selling, you know a million dollar condo

John Harcar (12:37.085)
Yeah, that’s crazy.

John Harcar (12:48.273)
Mm-hmm.

Everett Brunelle (12:48.622)
And now they’re like, okay, I’ve got a million dollars. I can go and buy whatever I want. Well, I don’t want just, you know, going to go buy a house in the suburbs. I’m going to go build a house. So we’ve got a lot of kind of a boutique builders, small builders that are, you know, starting to scale two to five X, as you kind of said, because they have so much more people, the supply and demand. Yeah, I mean, Oasis is one of the places as well that’s like

John Harcar (13:11.185)
Same with Boise here. mean, it’s same thing. It just exploded. Yeah.

Everett Brunelle (13:16.12)
booming like crazy for sure and I know quite a

John Harcar (13:17.915)
I’m seeing a lot more bill to rent though. Are you seeing a lot more bill to rent or are talking about people coming for subdivisions and all those types of things? Construction loans.

Everett Brunelle (13:25.76)
So it’s kind of both, right? So the big subdivisions are going to be your built to rents. I actually live in a community that was built to rent, especially in Austin. They started the build to rent. We’ve seen a little bit of a slowdown. It was really popular right after COVID because that’s when everybody started that wave of moving over. All the investors started to get into and started to build to rent.

John Harcar (13:34.471)
Okay.

John Harcar (13:47.709)
Mm-hmm.

Everett Brunelle (13:51.842)
but they kind of overbuilt on the rents. So then now the prices have dropped a ton and then the built to rent style has kind of slowed down, still profitable. I’m seeing a shift going into like the Carolinas into Tennessee, maybe not so much as Texas, but I mean, yeah, building as well. If you pull up a map in any of the major cities, you can go to the DFW area.

John Harcar (14:00.027)
Okay.

Everett Brunelle (14:20.352)
If you zoom in just in that major Metroplex area, it’s super weird. Like it’ll be on a street, it’ll be house, house, house, land, house, land, house, house, house, land, house. So, and they all have their parcel IDs. So you can just be a individual builder by that piece of land that’s already in a very established area. You know, don’t have to build outside or anything rural.

John Harcar (14:44.701)
Mm-hmm.

Everett Brunelle (14:45.582)
And then your comps are just right down the street because somebody else is building as well, or somebody just built right there as well. So lots of info, lots of, you know, supply there. think, you know, the demand is high. I think we’re short overall in Texas, over 300,000 homes.

John Harcar (14:51.045)
Right. So a lot of infill lots.

John Harcar (15:06.011)
Jeez, really?

Everett Brunelle (15:06.926)
We’ve got people still moving in. can’t keep up with that. So it’s like, it’s a never ending cycle of we need more homes. We need more builders. We need more loans. And that’s what I kind of saw. And I was like, I’m going to go after these types of loans because not as many loan officers understand it and not as many, um, many individuals kind of see it as like, Oh yeah.

John Harcar (15:10.503)
Yeah.

John Harcar (15:23.229)
Mm-hmm.

Everett Brunelle (15:29.216)
We have that option at our company, but I couldn’t tell you how to really underwrite a loan. couldn’t really tell you how to do it. Here are the numbers. If you want it, take it. So yeah, I’ve kind of took in that head on once I came over to this company seven months ago. And now everybody in the company comes to me when they have a ground up construction loan and they’re like, hey, Everett, can you help me? Is this a good deal for the borrower?

How can we underwrite this? How can we do this? So now, know, my company’s given me a little bit more of, I don’t know, I guess responsibility in that space and are including me in a lot more of things towards the ground up development space.

John Harcar (15:54.695)
Mm-hmm.

John Harcar (16:09.757)
Is there a kind of like framework or something that makes it look good? Are there certain things that you look at something and say, okay, that looks good?

Everett Brunelle (16:23.822)
Yeah, and I mean, I think it’s really, it’s going to be very similar to your, your fix and flip loan. You know, it’s, it’s just kind of reversed roles. So typically your fix and flip is going to be a high purchase price with a low rehab budget. Right? So we say 250 K is a purchase with $50,000 of a rehab and ground up construction. It’s reversed. So it’s like you’re buying land for 50 grand, but then you’re building for 250,000.

John Harcar (16:29.308)
Okay, okay.

Everett Brunelle (16:51.022)
And then your spread just has to be, it’s going to be also bigger as well. So instead of maybe on a fix and flip, your profit was, you know, 20, 30, 40 grand, your profit on a ground up construction. Exactly. Yeah. So it can be way, way, way more. But then also, you know, I think the big thing is also just looking at the plot of land. Is it buildable? Is it in a flood zone? Is it in, you know,

John Harcar (17:01.853)
two, three, four, under grand maybe.

Everett Brunelle (17:17.794)
does the borrower actually have experience, right? Not a lot of lenders want to lend to somebody who’s never done a ground up construction because they’re more risky. I’m just a loan officer. think, and this is just my personal opinion, I think it’s a lot safer than a fix and flip because you’re going into the building from scratch, right? You go into a fix and flip. If you couldn’t see something, you your pipes are eroded. You know, the flooring is bad because you couldn’t get into that house.

John Harcar (17:24.273)
Yeah.

John Harcar (17:45.649)
Mm-hmm.

Everett Brunelle (17:47.064)
Well, there goes your whole profit because now you have to pay for that. You’re building from scratch, right? And your five most expensive things is your foundation, framing, plumbing, electrical, which is all warranted as well. So I think it’s a safer risk for investors. I think it’s a lot easier to do as well.

John Harcar (17:50.235)
I have to redo it. Yeah.

John Harcar (18:09.213)
Mm-hmm.

Everett Brunelle (18:10.318)
And the process takes just the same amount of time, right? Like once you get your permits pulled, I’m seeing a lot of these builders, know, building spec homes that are, you know, just under 2000 square foot homes, they’re building and they’re done within three to four months. And then they’ve got a month or two on market. So they’re in and out of a loan within six months, right? So definitely takes the same amount of time as all of that, but back to, you know, the experiences, a lot of people want to see you

have experience in building, right? So someone who’s never built a home before, they joint venture with someone who has the JV in that way. What they can do, what we actually will accept at our company is…

If you’ve been in the fix and flip game and you’re wanting to transover, transition over to ground up construction, as long as you have three fix and flips that’s worth over 200,000, or if you’re in a market that doesn’t really need a flip of 200,000, but if it looks like you have documentation and you’ve torn a house all the way down to its studs, then we’ll give you a barrier entry loan.

for ground-up construction so that you’re not having to pay out of pocket in cash. So we favor the ground-up construction. We like it. We think it’s less of a risk. Also, obviously, still risk-induced.

John Harcar (19:39.358)
But I still, and I think, I’m under the firm believing that, you know, if you’re going to start doing and you don’t have the experience, just get someone who does partner with someone. And, and not just the fact that it’s going to help you get the funding, but it’s going to help you learn, save time and mistakes, save time and, and the pitfalls that you don’t want to run into. So, uh, it might cost you a little bit of money, but it’s well worth

Everett Brunelle (19:48.11)
100%.

Everett Brunelle (20:00.238)
100%. Yeah.

Or maybe you just don’t make as much, but hey, it’s better than making a little bit than losing money or not making anything at all. Right. Yeah.

John Harcar (20:11.407)
you’re not losing the knowledge the knowledge is you know what you take to the next one.

Everett Brunelle (20:15.956)
Exactly, far greater than anything else at the end of the day is the knowledge.

John Harcar (20:20.423)
What makes your company stand out versus some of other lenders out there?

Everett Brunelle (20:24.116)
So what stands out from us and what’s brought me over to this current company is a lot of lenders out there, and maybe it’s not lenders, maybe it’s just loan originators, and it’s the community that they’ve kind of curated is let me just tell you whatever I can so that I can get your deal.

And then for some reason we can’t do it, it’s all right, sorry, audio. It’s like, we’re gonna give you a very long no, but we’re gonna try to win your deal. With us, we’re gonna underwrite the loan as soon as possible and we’re gonna give you a quick no. I’d rather have you be mad at me for, or not mad at me, because I told you that right off the bat, I’m like, hey, this doesn’t look like something that we can do, rather than try to win your business.

get all of your information, have you do all this work, and then two weeks later, then I’m just like, hey, sorry, I can’t do it for you. That’s where investors get really mad. So our kind of company motto is we do what we say we’re gonna do. If I say that, hey, this is gonna be your rate and points based on the information that you’ve given me, that’s what it’s gonna be. We’re not gonna come back and change anything from you.

you unless you provided that you’re some super experienced builder or, you know, fix and flipper and you’ve never done one before, then obviously you’re going to get, there’s going to be a difference in writing points, right? So that’s something that’s huge is we do what we say we’re going to do. And again, we have so much expertise and knowledge. I think something that we also do on ground up construction is, is we’ll actually fund the purchase of the land as well.

So most times it’s lenders will say, yes, if you bring us the land purchased free and clear, we’ll fund 100 % of the vertical because that’s basically your collateral. What we can actually do is we’ll fund the purchase of the land with you.

John Harcar (22:21.661)
Okay, right.

Everett Brunelle (22:28.602)
and fund the vertical as well. So it’s basically we’ll do both of them together how you would do a fix and flip. That’s something super huge that a lot of lenders also won’t do, which has been super beneficial. It does take a little bit longer to do so because we do need some building plans in place.

So roughly takes us about three weeks because we have to get an appraisal. We need those building plans. So if you have a seller who’s willing to wait those, you know, three, four weeks for you to be able to get the plans, get them in place, get them over to us, then it’s a great option for those who can’t buy, you know, a plot of land that’s worth 50, 60, $70,000 outright in cash and then have to go out and do a vertical. And then at that point,

Now we still have our minimums, right? You need to show your interest reserve, you need to pay for closing costs, things like that. So it’s very reversed roles of like, you’ve got a lot of upfront cost. So with us being able to purchase the land with you, instead of having to own it free and clear, it’s huge. It helps a lot more people get into the build game or even, again, as you said in the very beginning, two to five X, right? I was talking to an investor and he was like, oh, well, know, rates are high, know, private money loan.

the hard money loans are high, getting into 12 to 14%, whatever it might be. I’d rather just pay for everything cash. And I asked the investor, was like, what’s your end goal? Are you just trying to build one at a time?

What are you trying to do? And he’s like, well, I want to build multiple at a time. And I’m like, well, you’ve got $300,000. I’m like, let’s do the math. You can do five with us, make a 20 % return cash on cash. So that’s 100 % return. Build five at a time within six months, and then go do it over. So now you’re at a 200 % return, rather than doing maybe one to two at a time with all of your own cash.

John Harcar (24:18.439)
Yeah.

Everett Brunelle (24:23.21)
Now your actual cash on cash return is less because you spent 300,000 to make 50,000 when you could have spent 50,000 to make 50,000. So when I was able to break it down to him, he was like, now ever. that would, conversation was three weeks ago. And now I have four loans with him right now that we’re in the middle of processing because it finally clicked. It’s cash is King. Yes, it’s true, but it’s more King when it’s in your own bank account and it’s leveraged in many ways.

John Harcar (24:42.877)
That’s awesome.

John Harcar (24:49.373)
Everett Brunelle (24:50.894)
rather than in the actual deal.

John Harcar (24:53.625)
Yeah, no, 100 % man.

Everett Brunelle (24:56.876)
So yeah, it’s huge that that’s something that we’re able to offer.

John Harcar (25:00.733)
Well, if folks are listening to this, they want to get in touch with you about some loans or whatnot, how do they reach out?

Everett Brunelle (25:07.724)
Yeah. So, do you list like my company info and like, I mean, if you were just listening, you know, you can find me on Instagram, ever Brunel. I post a lot of real estate content there. you can find me on LinkedIn ever Brunel.

John Harcar (25:12.037)
Yeah, we’ll put your stuff in the show notes, but if you want to give it out, can.

Everett Brunelle (25:25.686)
And then our company name is American Heritage Lending. So yeah, based in Irvine, California, but we’ve got guys everywhere out in the field. And if you’re in the Texas market, I I drive to Dallas all the time. I’m in Austin, and I’m willing to meet you up in Houston and San Antonio as well, because they’re not too far off.

John Harcar (25:46.461)
Very cool. Well, I appreciate you coming on here ever and sharing your knowledge guys. I hope you enjoyed the show. Hope you took some good notes and if you have any interest or do anything in Dallas or the DFW or Austin or anywhere in Texas, really give him a call. Guys, we’ll see you on the next one. Cheers.

Everett Brunelle (26:00.48)
Yeah, that’s it. Thank you so much.