Investor guide. Updated September 2026
How do you finance a condo conversion or small condo development in Massachusetts?
Condo conversions and small condo developments in Massachusetts are financed with a construction or heavy rehab bridge loan sized on cost (typically up to 80% to 90% for experienced developers) and capped at 65% to 70% of the completed sell-out value, with partial releases that pay down the loan as each unit closes. The legal work (master deed, condominium trust, unit deeds and floor plans under Chapter 183A) has to be budgeted and timed with the build, and several Greater Boston cities have conversion ordinances with tenant notice requirements that affect the schedule.
The loan structure
| Element | Typical 2026 terms |
|---|---|
| Product | Ground up construction loan (new build) or heavy rehab bridge loan (conversion of an existing building) |
| Loan to cost | 80% to 90% for experienced developers; 70% to 80% on a first condo project |
| Loan to completed value | 65% to 70% of the aggregate sell-out value, sometimes with a discount for absorption on larger projects |
| Rate and points | 10% to 13% interest-only; 1 to 3 points |
| Term | 12 to 24 months, with extensions |
| Draws | Construction holdback released by milestone after inspection |
| Partial releases | Each unit sale pays the lender a release price, commonly 100% to 120% of that unit's share of the loan, until the loan is repaid |
| Pre-sales | Usually not required under 8 to 10 units; sometimes requested on larger projects |
A worked example: 8 new condos in Lynn
Land and existing structure $1,300,000. Construction budget $2,600,000. Total cost $3,900,000. Projected sell-out $4,800,000 (8 units at $600,000). Experienced developer with a licensed GC and approved plans.
- LTC test at 85%: $3,315,000
- Loan to completed value at 70%: $3,360,000
- Loan: roughly $3,300,000, with about $600,000 of developer equity, most of it in the land
- Release price per unit at 115% of pro rata: $3,300,000 / 8 x 1.15 = about $474,000 per closing, so the loan is repaid after the seventh unit and the eighth is free and clear
Interest is charged on drawn funds with most construction sources, so the early months are inexpensive and the last six months before sell-out are where the carry concentrates. Budget an interest reserve accordingly.
The legal work you have to schedule
- Master deed and condominium trust under Massachusetts General Laws Chapter 183A, prepared by a condo attorney and recorded before the first unit can be sold. Allow 4 to 8 weeks and several thousand dollars.
- Floor plans certified by an architect or engineer, recorded with the master deed.
- Unit deeds and 6(d) certificates at each closing.
- Budget and reserve schedule for the association, which buyers' lenders will review.
- Lender consent: the construction lender's mortgage is recorded before the master deed, so the lender signs a consent and the partial release mechanics are in the loan documents from day one.
City conversion ordinances
Converting an existing occupied rental building is different from a new build. Several Greater Boston cities, Boston among them, have condominium conversion ordinances that require notice to existing tenants, relocation payments in some cases, and waiting periods before conversion or eviction. These rules can add months and cost, and a lender will want to see that the notice process was handled correctly before closing on a conversion of a tenanted building. A vacant building or a new build avoids this entirely.
What underwriting focuses on
- Absorption. How many comparable units sold in the submarket in the last 12 months at your price point, and how long they sat.
- Per-unit value support. Three to six sold condo comps for the finished product, not multifamily comps.
- The builder. Prior condo or multi-unit deliveries, not just single family flips.
- Permits and zoning. Approved plans, or a clear path with dates. Variances and special permits in process are underwritten as risk.
- Exit flexibility. If units do not sell on schedule, can the project be held as rentals and refinanced on a DSCR or bank loan? Lenders like a plan B that works.
How 316 Capital places condo projects
316 Capital is a private lending and capital advisory firm based in Boston. Condo development is a specialty of a small number of our institutional capital partners, each with different views on unit count, pre-sales and release pricing. We place the project with the partner built for it and structure the releases so the developer's profit is not trapped in the last unit.
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Request terms Estimate pricingCommon questions
Do I need pre-sales to get a condo construction loan?
Usually not on projects under 8 to 10 units with strong comps. Larger projects or thin submarkets may require a percentage of units under agreement before the construction holdback funds. Pre-sales help the pricing either way.
What is a partial release and how does it work?
When one unit sells, the lender releases its mortgage on that unit in exchange for a release price, commonly 100% to 120% of the unit's pro rata share of the loan. The premium above 100% means the loan is repaid before the last unit sells, which protects the lender and leaves the final units unencumbered.
Can I convert a tenanted building in Boston to condos?
Yes, but Boston's condominium conversion ordinance requires notice to tenants, waiting periods and in some cases relocation payments. Build that time and cost into the project, and expect the lender to confirm the process was followed.
What if the condos do not sell?
The fallback is to lease the units and refinance the building on a DSCR or bank loan. Lenders underwrite this plan B on every condo project, so choose a design and price point that works as rentals too.
How is a condo project different from an 8 unit rental building for financing?
The loan structure is similar during construction, but the exit is unit sales rather than a refinance, so the lender sizes the loan on the aggregate sell-out value with partial releases, and the master deed and condominium trust are required before any unit can close.
316 Capital is a private lending and capital advisory firm. We arrange business-purpose real estate financing through institutional capital partners; loans are not available for owner-occupied primary residences. Figures on this page are typical market ranges as of September 2026 and are not an offer or commitment. Every quote is transaction-specific and subject to underwriting. Contact info@316cap.com or +1 (617) 546-4817.