Fix-and-flip investing has long anchored private lending in New York, but that model is shifting as rising costs and tighter margins push investors toward more ambitious projects. Ruben Izgelov, CEO and Founder of We Lend, a private direct lender based in New York, reports that a growing portion of the firm's loan volume now funds construction work well beyond standard renovations—a trend he expects to persist through the remainder of the year.

Historically known for financing quick-turnaround fix-and-flip loans across New York and New Jersey, We Lend is increasingly originating ground-up construction loans, condo conversions, and both vertical and horizontal building extensions. The conventional fix-and-flip approach—acquiring a property, spending $50,000 to $100,000 on cosmetic upgrades, and reselling—no longer delivers the returns it once did, according to Izgelov.

"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."

The transformation is reflected in deal sizes. Izgelov noted that construction budgets on loans passing through We Lend have climbed from the $100,000–$200,000 range into the $1 million–$2 million range. In some cases, the construction budget now surpasses the property's purchase price. That shift changes the nature of the credit risk: larger construction plans can depend more heavily on permitting, contractor performance, draw management, interest carry, and eventual refinance or sale execution than a cosmetic renovation does.

To manage the heightened risk associated with larger projects, We Lend maintains a disciplined underwriting process. The company concentrates on familiar markets and requires documentation that many lenders forgo. Before funding a conversion or extension, the firm mandates an architect's letter confirming the planned work can proceed as of right—without the need for rezoning or a variance. In real estate development, that distinction matters because projects requiring discretionary approvals can face additional review, delay, or uncertainty before construction can proceed. For larger jobs, general contractors must sign completion guarantees.

"We want GCs committed to the project just as much as the borrower is, without having to personally guarantee the loan. They're guaranteeing that the project gets completed," Izgelov explained. "That keeps the playing field level between the borrower and the GC, especially when the borrower hasn't worked at this scale before."

Two recent transactions highlight the scope of projects We Lend now finances. In the first, a borrower acquired a bank-owned eight-unit building after the prior lender refused to finance improvements. We Lend funded the property's conversion into 16 fully leased units. The borrower is now in talks with several banks about a refinance that would free up original equity for a subsequent project.

In a separate deal located in an affluent New Jersey suburb, a borrower was approximately 85 percent through construction of a 22,000-square-foot speculative home when a lot-line sale to a neighbor necessitated paying off an existing private loan. We Lend restructured and refinanced that loan, supplying the payoff along with a modest cash infusion to finish the remaining construction.

Izgelov cautioned that the most common miscalculation among fix-and-flip investors transitioning into larger projects involves timeline expectations. While a typical fix-and-flip loan spans six to eight months, ground-up construction, major conversions, and extensions often require considerably more time. He advised borrowers to "budget carefully for the interest that has to be paid over that term. 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 warned against chasing trends rather than actual market demand. "If there's demand for a project of that size or caliber, great. But don't build a mega mansion in a neighborhood that can't support it just because that's the trend," he said.

Additional details on how We Lend structures its loans are available on the company's How It Works page. Source: Citybuzz.