Construction projects require substantial financing. A Michigan-based financier can help make your dream project a reality. Michigan is one of the many states that provide short-term funding for the cost of building a new structure or renovating an existing one. Borrowers can obtain loans for both residential and commercial projects. This comprehensive guide provides all the information you need to know about getting Michigan construction loans, including how to plan for your new development.
New Construction
Before we get into the specifics, it is important to understand the current building landscape. Knowing that firms continue to invest in the state will help you sleep easier. There have been several construction projects recently completed by well-known firms in Michigan. For example, Little Caesars Arena is a multi-purpose sports and entertainment venue in downtown Detroit completed in 2017 by Barton Malow. The arena is home to the Detroit Red Wings and Detroit Pistons and has a seating capacity of 20,000.
Another great example is the Biological Sciences Building at the University of Michigan in Ann Arbor. It was completed in 2018 by Skanska. The $261 million project is a state-of-the-art research facility with a vivarium, greenhouse, and specialized research labs. The M-1 Rail, also known as the QLine, is a 3.3-mile streetcar system in downtown Detroit designed to ease transportation congestion and add a spark of life to tourist attractions. Completed in 2017 by Stacy and Witbeck, the project was a collaboration between private investors and the city of Detroit and is a crucial part of the city’s revitalization efforts. Other notable examples are the Consolidated Rental Car Facility at Detroit Metropolitan Airport. It was completed in 2019 by Walbridge. The $330 million project is a state-of-the-art facility that houses all rental car operations in a central location. Lastly, the Exchange is a $90 million mixed-use development in downtown Kalamazoo completed in 2018 by Pioneer Construction. The project includes luxury apartments, office space, and retail and dining options.
These are just a few examples of the commitment to invest in Michigan’s growing atmosphere. The state is home to many prominent construction companies, and many exciting projects are underway.
Types of Construction Loans in MI
Most states have two main types of construction loans: single-close loans and two-close loans. Single-close loans combine the construction loan and the permanent mortgage into one loan, which means you only have to go through the loan process once. On the other hand, two-close loans are separate loans for the construction and permanent phases.
Single-Close Construction
Single-close construction is a convenient option for borrowers who want to avoid the hassle of obtaining separate financing. However, they offer the advantage of only paying one set of closing costs and a lower interest rate than two-close loans.
Two-Close Construction
Two-close construction loans are a good choice for borrowers who want more control over their financing. With two-close loans, you can shop around for the best interest rates and terms for both the construction loan and the permanent mortgage. However, you will have to pay separate closing costs for each loan.
Ready to find a Michigan construction loan that’s right for you? Reach out to to friendly advisors.
Legal Requirements
Construction laws in Michigan may differ from other states in several ways.
The state has adopted the International Building Code (IBC), which sets minimum requirements for building safety, energy efficiency, and accessibility. Workers’ compensation Michigan’s unique workers’ compensation system provides injured workers with lifetime medical benefits. Employers must purchase workers’ compensation insurance to cover the costs of medical care and lost wages. Payment laws in Michigan govern how contractors and subcontractors are paid for their work. For example, the state has a “prompt payment” law that requires owners and contractors to pay their subcontractors within a specific timeframe.
The state requires that the state license all contractors and builders. To obtain a license, contractors must pass a written examination and meet specific requirements for experience, education, and financial stability. The state has its own building codes governing construction practices and standards.
Michigan has laws that allow contractors and subcontractors to file a mechanic’s lien to secure payment for their work. These liens give contractors a legal claim to the property if they are not paid for their work. Contractors, builders, and property owners must know these laws to ensure compliance and avoid legal issues.
Factors to Consider
Michigan’s economy has grown in recent years, with many factors contributing to its success. Knowing these stats will help you make an informed decision if you plan on building or living in the state.
The state has experienced strong economic growth recently, with a gross domestic product (GDP) of $540.9 billion in 2020. The state has grown in several key industries, including manufacturing, healthcare, and technology. In addition, Michigan has implemented several business-friendly policies that have made it easier for builders and contractors to do business in the state. For example, the state has streamlined its permitting process and provided tax incentives for companies that invest here.
It also has a highly skilled workforce with a strong focus on science, technology, engineering, and math (STEM) education. This has helped attract high-tech industries to the state and provided a strong talent pool for the construction industry.
Michigan has a relatively affordable housing market compared to other states, making it an attractive destination for homebuyers and builders. According to Zillow, the median home value in the state is $195,900 as of December 2021, which is significantly lower than the national median of $310,700.
It continues to make significant investments in its infrastructure in recent years, including roads, bridges, and public transportation (Remember the Qline). This has helped attract new businesses to the state and provided opportunities for construction firms to work on large-scale infrastructure projects.
These factors have helped make Michigan’s building economy more competitive and attractive to lenders issuing construction loans. While the state faces challenges like any other, it has shown a solid commitment to supporting the construction industry and creating opportunities for growth and development.
Scouting Building Locations
Are you still trying to decide on a city? Michigan has several great cities to live in and build new developments. Ann Arbor is a vibrant college town and home to the University of Michigan. The city’s strong economy and diverse population make it a great place to build new construction. Ann Arbor has a thriving arts and culture scene, with numerous museums, galleries, and theaters.
Grand Rapids is another option, featuring a growing city with a bustling downtown and a thriving arts and culture scene. The city has a strong job market, with numerous manufacturing, healthcare, and technology opportunities. Grand Rapids is also known for its excellent schools and family-friendly neighborhoods.
Traverse City is a beautiful waterfront city located on the shores of Lake Michigan. The city is known for its natural beauty, with numerous parks, trails, and beaches. Traverse City also has strong home values, with a focus on healthcare, tourism, and agriculture. Our last honorable mention is Detroit. It is a city undergoing revitalization, with numerous new construction projects currently being developed. The city has several world-class museums, theaters, sports teams, and a vibrant food and arts scene. =
These are just a few incredible cities to consider when pursing construction loans in Michigan. Each town has unique characters and opportunities, so it’s essential to research and choose the one that best fits your needs and lifestyle.
Our team has helped hundreds of clients secure the best financing for their projects. Contact us to schedule a call and learn more about your options.