Construction Loans in Maryland for 1-4 Unit Rentals Now

Fix and Flip Construction Loans in Maryland: 2025 Guide for 1-4 Unit Rentals

Are you a Maryland real estate investor looking to scale your rental portfolio in 2025? Whether you’re updating rowhomes in Baltimore, revitalizing duplexes in Silver Spring, or building new fourplexes in Annapolis, this guide unpacks the full landscape of fix & flip and construction financing for 1-4 unit properties in Maryland. Learn about the latest loan options, lender programs, application steps, and strategies to maximize returns in the state’s hottest investment neighborhoods.

Why Maryland? Residential Investment Opportunities in 2025

Maryland’s dynamic job market, proximity to DC and Northern Virginia, and diverse housing stock create ripe conditions for lucrative fix & flip or construction projects. Investors are eyeing targeted rental opportunities in:

• Baltimore City: Federal Hill, Canton, and Charles Village offer affordable single-family and duplexes primed for rehab.
• Montgomery County: Silver Spring and Rockville see robust rental demand from commuters and students.
• Prince George’s County: Hyattsville and College Park have thriving rental and flip opportunities driven by local universities.
• Annapolis: Historic rowhomes and newer triplexes/fourplexes remain popular with young professionals.
• Frederick: Fast-growing neighborhoods like West Frederick and Ballenger Creek attract renters seeking affordability.
• Columbia & Ellicott City: Diverse family housing for steady rental income.
• Eastern Shore (Salisbury, Easton): Renovated multifamily properties meet demand from seasonal and year-round renters.

Types of Fix and Flip & Construction Financing in Maryland for 2025

Maryland investors benefit from a competitive lending environment, offering tailored solutions for 1-4 unit properties. Here’s how they stack up:

Need capital? GHC Funding offers flexible funding solutions to support your business growth or real estate projects. Discover fast, reliable financing options today!

Test Your Expertise: The Complexities of the 1031 Exchange

As a sophisticated real estate investor, you understand that the 1031 Exchange is a cornerstone strategy for tax deferral and wealth accumulation. But beyond the basics, the intricacies of the 1031 Exchange rules can pose significant challenges. This quiz is designed to test your in-depth knowledge and highlight critical nuances that separate casual investors from true experts in 1031 Exchange transactions.

Instructions: Choose the best answer for each question.

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Page 1 of 5

Question 1: Understanding "Like-Kind" in a 1031 Exchange

Which of the following scenarios most likely qualifies as a like-kind property exchange under IRS Section 1031, allowing for 1031 Exchange tax deferral?

a) An investor exchanges a portfolio of publicly traded REIT stocks for a commercial retail building. b) An investor exchanges their primary residence, used for personal living for 15 years, for a duplex intended for rental income. c) An investor exchanges raw land held for appreciation in Texas for a stabilized apartment complex in Florida, both held for investment. d) An investor exchanges a classic car collection (personal property) for a single-family rental home (real property).

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Question 2: Navigating the 45-Day Identification Period for a 1031 Exchange

An investor sells a multi-family property on June 15th for a 1031 Exchange. According to the strict timelines, by what date must they identify their replacement properties to comply with the 1031 Exchange requirements?

a) July 30th of the same year, as the 45-day period includes weekends and holidays. b) August 29th of the same year, allowing for an extra 45 days if needed. c) December 12th of the same year, aligning with the 180-day completion period. d) January 1st of the following year, if they plan to file for an extension.

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Question 3: The Role of a Qualified Intermediary (QI) in a 1031 Exchange

Why is the engagement of a Qualified Intermediary (QI) absolutely critical for the validity of a 1031 Exchange?

a) The QI provides investment advice and helps the investor choose the best replacement property for their 1031 Exchange strategy. b) The QI acts as a liaison with the IRS, directly negotiating tax liabilities related to the 1031 Exchange process. c) The QI holds the proceeds from the relinquished property's sale, preventing the investor from having "constructive receipt" of funds, which would invalidate the 1031 Exchange. d) The QI provides legal and tax advice to ensure the 1031 Exchange is perfectly compliant

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Question 4: Understanding "Boot" and its Impact on a 1031 Exchange

An investor sells a commercial building with $500,000 in equity for a 1031 Exchange. They purchase a replacement property for $450,000, effectively reducing their debt by $50,000. What is the tax implication of this scenario within the 1031 Exchange framework?

a) The entire 1031 Exchange is disqualified because the investor "traded down" in value. b) The $50,000 in reduced debt is considered "boot" and will be immediately taxable as partial gain in this 1031 Exchange. c) There are no immediate tax implications, as the primary goal of the 1031 Exchange is only about the "like-kind" nature of the properties. d) The investor can defer the $50,000 as long as they pay off other personal debts with the funds, still qualifying for a full 1031 Exchange.

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Question 5: Advanced 1031 Exchange Strategies & Flexibility

An investor aims to sell a highly appreciated single-tenant retail property and replace it with multiple smaller, diversified multi-family units to spread risk. Which of the following 1031 Exchange identification rules best allows for this diversification strategy, maintaining eligibility for a 1031 Exchange?

a) The "Three Property Rule," where the investor can identify up to three properties of any value, regardless of the relinquished property's value, for their 1031 Exchange. b) The "200% Rule," allowing identification of any number of properties, provided their aggregate fair market value does not exceed 200% of the relinquished property's value for the 1031 Exchange. c) The "95% Rule," which states that if more than three properties are identified, the investor must acquire at least 95% of the aggregate value of all identified properties to qualify for the 1031 Exchange. d) All of the above are valid identification rules within a 1031 Exchange, offering flexibility for various investment strategies.

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The Ultimate DSCR Loan for Rental Property Quiz

Are you looking to expand your real estate investment portfolio? A DSCR loan might be the perfect tool to help you achieve your goals without relying on traditional income documentation. Test your knowledge with this quiz to see if you're ready to master the intricacies of a DSCR loan for rental property.

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Page 1 of 5

What is the primary factor a lender considers when approving a DSCR loan for rental property? A) The borrower's personal income and debt-to-income (DTI) ratio. B) The borrower's credit score and employment history. C) The property's potential rental income compared to its monthly expenses, known as the Debt Service Coverage Ratio. This is the key metric for a DSCR loan for rental property eligibility and approval. D) The total value of the borrower's existing investment properties and personal savings.

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How does a DSCR loan for a rental property differ from a conventional mortgage for a personal residence? A) A conventional mortgage requires a DSCR calculation, whereas a DSCR loan for a rental property does not. B) A DSCR loan for a rental property primarily focuses on the property's cash flow, allowing investors to qualify without traditional income verification, unlike a conventional mortgage which is based on personal income and liabilities. C) A conventional mortgage has a higher interest rate and stricter requirements than a DSCR loan for a rental property. D) A DSCR loan for a rental property is only available for commercial properties, not residential rental properties.

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What is an ideal Debt Service Coverage Ratio (DSCR) for a lender when evaluating a DSCR loan for a rental property? A) A DSCR of 0.75, indicating the property generates 75% of the income needed to cover its debt service. B) A DSCR of 1.00, meaning the property's income exactly equals its debt service. C) A DSCR of 1.25 or higher, as this indicates the property's income is greater than its expenses, making it a strong candidate for a DSCR loan for a rental property and providing a buffer for unexpected costs. D) A DSCR of 2.00, which is the standard minimum for all investment properties, regardless of location or market conditions.

Page 4 of 5

Which of the following expenses are typically included in the calculation of the Debt Service Coverage Ratio for a DSCR loan for a rental property? A) The property's mortgage payment (principal and interest), property taxes, and insurance, which are the core components used to determine if the property can support the debt. B) The property's mortgage payment, property taxes, insurance, and the borrower's personal credit card debt. C) The property's monthly rental income and all utility bills, regardless of who pays them. D) Only the principal and interest payment of the loan, as other expenses are not considered in a DSCR loan for a rental property calculation.

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Who would most benefit from using a DSCR loan for a rental property? A) A first-time homebuyer with a W-2 salary and a high debt-to-income ratio, who is looking to purchase a primary residence. B) A seasoned real estate investor with multiple properties who wants to expand their portfolio without using personal income to qualify, making a DSCR loan for a rental property the ideal financing solution for their needs. C) Someone looking to finance a primary residence with a low down payment and a government-backed loan. D) An individual with a very low credit score who cannot qualify for any other type of loan.

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1. Fix & Flip Loans

• Short-term (6-18 month) loans to purchase and rehabilitate single-family, duplex, triplex, or fourplex
• Up to 90% LTC (Loan-to-Cost); 100% of rehab costs common for qualified borrowers
• Rates: 7.99%-11% (2025 market average in Maryland), points: 1.5-3%
• Interest-only payments during project, no prepayment penalties

2. Construction Loans

• Short-term (12-24 months) for ground-up construction or major rehab on 1-4 units
• Usually require 10-20% down, but some local programs assist with lower down payments
• Disbursement via draws as milestones are reached
• Convertible to long-term DSCR rental financing (construction-to-perm)

3. Hard Money Loans

• Flexible qualification (asset-based focus), ideal for investors with limited W-2 income or complex tax returns
• Loan sizes: $75,000 to $3M (common for 1-4 units in MD: $120K-$500K)

4. DSCR Rental Loans

• Debt Service Coverage Ratio loans: qualify using property’s rental income, not personal DTI
• Great for holding and cashout-refinancing renovated SFR, duplex, triplex, or fourplex in Maryland
• Term: 30 years, fixed or adjustable, rates from 6.99%–8.75% for 2025

Lenders Specializing in Maryland 1-4 Unit Financing (2025)

• Lima One Capital – Offers fix & flip, new construction, and DSCR products for SFR, duplex, triplex, and fourplex investments statewide.
• Kiavi (formerly LendingHome) – Leading provider for fix & flip and short-term rehab loans with streamlined online process.
• RCN Capital – National hard money lender with deep Maryland experience, funds 1-4 unit fix & flip/construction deals.
• Maryland Private Mortgage (Baltimore-based) – Local hard money & construction specialist, fast draws for rehab and ground-up projects in MD metros.
• REI Capital Partners – Offers DSCR and construction-to-perm solutions for Maryland investment properties.
• Direct Lending Partners – Aggressive fix & flip and rehab programs available in central MD and DC suburbs.

Step-by-Step: Maryland Fix & Flip/Construction Loan Application (2025)

1. Project Identification: Find a viable property (single-family, duplex, triplex, or fourplex) in a high-demand MD neighborhood. Analyze ARV and rehab scope.
2. Lender Pre-qualification: Connect with reputable lenders (see above). Submit basic info: investment experience, credit score (620+ preferred), business entity Docs (LLC, S-Corp recommended).
3. Scope of Work & Budget: Prepare a detailed renovation or construction budget, timeline, and contractor bids. Some lenders require professional inspections.
4. Loan Application: Complete the application (online or with an officer). Upload purchase contract, scope of work, entity structure, proof of funds for cash-to-close, and previous project list (if any).
5. Valuation & Underwriting: Lender orders a property appraisal and reviews borrower/project credentials. For construction, plans/permits and contractor insurance required.
6. Approval & Closing: Receive term sheet/commitment, finalize terms, sign docs. Bring required down payment/closing funds. Title/deed processed with attorney or title company.
7. Rehab Draws/Construction Disbursements: Funds released in stages as work is verified. Coordinate with lender’s draw inspectors.
8. Project Completion & Exit: Once project is complete, either sell (fix & flip) or refinance into a 30-year DSCR rental loan for long-term hold/cashout.

Maryland Fix & Flip/Construction Loan Success Stories (2024-2025)

• Baltimore Rowhome Transformation: Investor acquired a 2-unit property in Canton for $200,000, used a $170,000 fix & flip loan (90% LTC) from RCN Capital, funded $65,000 in renovations (100% of rehab), and sold for $375,000. Total project time: 8 months, ROI 30%.
• Silver Spring Duplex Construction: Builder purchased land in Silver Spring, secured a $420,000 construction loan from Lima One Capital, contributed $60,000 down. Completed project in 11 months, refinanced to DSCR loan at 7.25% for $480,000 (70% LTV), kept both units as cash-flowing rentals.
• Annapolis Fourplex Rehab/Hold: Buyer acquired a neglected fourplex in downtown Annapolis for $520,000 (under market), financed $400,000 with Maryland Private Mortgage, completed $110,000 in upgrades, appraised at $800,000. Cashed out with Kiavi DSCR loan at 7.9%, netting over $100,000 for new acquisitions.
• Hyattsville SFR Flip: Entry-level investor used a $140,000 hard money loan from Direct Lending Partners (75% LTV) to purchase and rehab a single-family home for $45,000 in profit after 7 months.

2025 Maryland Market Intelligence: What’s New?

Despite cost increases for materials and ongoing demand for workforce housing, Maryland’s best investment areas offer resilient rental yields and flip potential. Key trends include:

• Rising rents and tight inventory in Baltimore, Montgomery, and Prince George’s Counties
• Growing lender preference for experienced operators—though first-timers are welcome with strong project documentation
• Quick draw processing and flexible underwriting increasingly set apart the region’s top lenders
• DSCR rental loans have become the main exit strategy after rehab, especially for portfolios of 1-4 unit properties
• Continued growth in demand for affordable duplex/triplex/fourplex units in transit-oriented neighborhoods

FAQ: Fix & Flip and Construction Financing in Maryland

• Minimum credit score: Most lenders require 620+, but programs for lower scores exist with higher rates.
• Loan amounts: $75,000 to $500,000+ common for 1-4 unit property investors in MD.
• Investor experience: Not always required—solid project plan, verified contractor, and personal stake can offset limited track record.
• Rehab funds: Many lenders offer 100% of rehab/construction costs as draws. Have reserves for working capital and surprises.

Conclusion: Ready to Invest in Maryland’s 1-4 Unit Properties?

2025 is a prime time to leverage fix & flip and construction loan programs in Maryland’s robust real estate market. From fast-growing suburbs to revitalized city neighborhoods, ample lender options and a range of loan products make it possible to scale your rental holdings or capital gains. Work with proven Maryland lenders, know your exit, and focus on emerging neighborhoods to maximize your returns and build long-term wealth.

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✅ Small Business Resources 

• SBA – Small Business Administration
  https://www.sba.gov

• SCORE Mentors (Free Mentoring & Workshops)
  https://www.score.org
• Small Business Development Centers (SBDC)
  https://americassbdc.org

Are You an SBA Real Estate Loan Expert?

Test your in-depth knowledge on using SBA Loans for owner-occupied commercial Real Estate acquisition. These questions delve into the critical details that can impact your business's growth and financial strategy.

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Page 1 of 5

For an existing commercial property, what is the minimum owner-occupancy percentage required for an SBA 7(a) real estate loan, and does this specific scenario qualify?

A manufacturing company plans to acquire a 30,000 sq ft industrial real estate facility using an SBA 7(a) Loan. The company initially needs 18,000 sq ft for its operations and intends to lease out the remaining 12,000 sq ft.

A) 60%; Yes, it qualifies. B) 51%; Yes, it qualifies. C) 75%; No, it does not qualify. D) 60%; No, it does not qualify, as they are leasing out a portion.

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Which of the following sets most accurately represents additional cost categories that can typically be financed within an SBA 504 Loan for a commercial real estate project?

Hint: Beyond the straightforward purchase of a commercial real estate property, an SBA 504 Loan is highly effective for comprehensive projects.

A) Business inventory, working capital, and employee salaries. B) Building renovations, long-term machinery essential to operations within the property, and soft costs like architectural fees. C) Advertising expenses, short-term equipment leases, and utility deposits. D) Personal real estate investments, vehicles for personal use, and stock market investments.

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Between an SBA 7(a) Loan and an SBA 504 Loan, which program generally offers the lowest typical borrower down payment for a commercial real estate acquisition, and what is that common minimum percentage for established businesses?

A highly profitable professional services firm in a competitive market wants to purchase its office real estate with minimal upfront capital. The firm's owners prioritize cash flow and liquidity.

A) SBA 7(a) Loan; 15% B) SBA 504 Loan; 10% C) SBA 7(a) Loan; 5% D) SBA 504 Loan; 20%

Page 4 of 5

For new construction, what is the initial minimum owner-occupancy percentage required, and what is the maximum timeframe to meet the full owner-occupancy threshold, for an SBA Real Estate Loan?

A fast-growing tech startup plans to construct a new 50,000 sq ft headquarters using an SBA Loan. They will immediately occupy 35,000 sq ft and have a definitive plan to occupy the remaining 15,000 sq ft within two years as their team expands.

A) Initial 51%, full 80% within 5 years. B) Initial 60%, full 80% within 3 years. C) Initial 75%, full 100% within 1 year. D) Initial 51%, full 100% within 2 years.

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What is this crucial requirement, and what fundamental principle does it underscore for the lender?

When securing an SBA Loan for a commercial real estate purchase, principal owners with a 20% or greater ownership stake are almost universally required to provide a specific type of assurance beyond the collateral of the real estate itself.

A) A fixed-rate interest payment commitment, demonstrating long-term stability. B) A first-lien position on all personal assets, ensuring full recovery. C) A personal guarantee, signifying the owners' personal commitment to loan repayment. D) A business plan with projected revenue growth of at least 15% annually, showing future viability.

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✅ Real Estate Investor Resources

• AirDNA (Short-Term Rental Data)
  https://www.airdna.co

• Rentometer (Rent Comps)
  https://www.rentometer.com
• Zillow Research & Data
  https://www.zillow.com/research

DSCR Loan IQ Quiz!

Test your knowledge of Debt Service Coverage Ratio (DSCR) loans!

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Page 1 of 3

What is the primary factor a lender focuses on when approving a DSCR loan for an investment property? a) The borrower's personal debt-to-income (DTI) ratio b) The property's ability to generate enough income to cover its mortgage payments c) The borrower's credit score history over the past 10 years d) The total number of investment properties the borrower already owns

Page 2 of 3

If a property has a Net Operating Income (NOI) of $5,000 per month and its total monthly debt service (PITI) is $4,000, what is its DSCR? a) 0.8x b) 1.0x c) 1.25x d) 5.0x

Page 3 of 3

Which type of borrower most commonly benefits from using a DSCR loan? a) First-time homebuyers purchasing a primary residence b) Investors with a strong W-2 income and minimal tax deductions c) Self-employed individuals or those with complex income who want to avoid traditional income verification d) Homeowners looking to refinance their primary residence for a lower interest rate

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What's the most appealing aspect of a DSCR loan for your investment property financing needs?

A) No personal income verification (no W-2s or tax returns needed!)B) Approval based on the property's cash flow (DSCR)C) Faster closing times compared to traditional mortgagesD) Flexibility for self-employed investors and complex financial situations

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