How a Seattle Home Gets Built
A plain-language guide to how infill development works: the stages, where the money comes from, what drives cost and time, and what can go wrong.
From Land to Keys
Every infill project moves through the same six stages. The work and the risk change at each one.
Land and site analysis
Find a site, check what zoning allows, and test it against what the zoning map does not show: drainage, trees, utilities, slope, and street improvements. Most sites fail here, and that is the point of the step.
Design and permits
Architects and engineers draw the project while the city reviews it. In Seattle this usually means a building permit plus, for homes sold separately, a unit lot subdivision that creates the individual lots. That second record often sets the real finish line.
Financing
Once permits are in reach, the project raises its money: a construction loan from a bank, plus equity that covers the rest of the cost.
Construction
Foundation, framing, systems, finishes, inspections. Draws from the construction loan pay for work as it is completed and inspected.
Sale or lease-up
Homes are sold one by one, or a rental building is leased. Sale proceeds repay the construction loan first.
Close-out
Remaining proceeds are distributed according to the project agreement, final accounting is completed, and the warranty period runs on.
Where the Money Comes From
Most for-sale and rental projects are paid for with two kinds of money, and the order they are repaid in matters.
Debt: the construction loan
A bank lends a large share of the cost, secured by the project. It is paid out in draws as work is inspected, earns interest the whole time, and is repaid first when homes sell or the building refinances.
Equity: everything else
Equity covers land, early design and permit costs, and the part of construction the bank will not lend. It is repaid only after the loan, which is why it carries more risk and why projects are judged on how carefully they are planned.
What Drives Cost and Time
What the zoning map does not show
Drainage that does not reach the lot, a protected tree, utility upgrades, and required street work can each change what fits on a site and what it costs. They are found in the site analysis, or they are found later at a much higher price.
The clock
Time is a cost. Interest, taxes, and insurance run every month, and they run until homes can legally close. In Seattle that can be well after construction ends: on one of our recent projects, the lot subdivision took 225 days from submittal to recording.
What Can Go Wrong
No project is without risk. The common ones are well known, and good planning names them up front.
Permit delays
Review cycles, corrections, and backlogs stretch the schedule and add carry cost.
Cost overruns
Material prices, labor, and site surprises can exceed the budget and use up contingency.
Market shifts
Sale prices, rents, and how long homes take to sell can change between the plan and the finish.
Interest rates
Higher rates raise the cost of carrying a project and can affect what buyers can pay.
Execution
Schedules, trade partners, and quality control decide whether a sound plan becomes a sound result.
The unknown
Some risks are not predictable. That is why budgets carry contingency and plans are tested against bad cases, not just good ones.
Terms You Will Hear
- Pro forma
- The project budget and forecast: land, hard costs, soft costs, financing, sale prices, timing. A plan, not a promise.
- Hard costs
- Labor and materials to build the homes.
- Soft costs
- Design, engineering, permits, fees, insurance, legal, and financing costs.
- Carry cost
- What it costs to hold a project over time: interest, taxes, insurance. It runs until homes can legally close, not just until construction ends.
- Contingency
- Money set aside in the budget for things that go wrong. Every real budget has one.
- Construction loan
- Short-term bank debt that funds construction in draws and is repaid first when homes sell.
- Equity
- The money that is not borrowed. It is repaid after the loan, so it carries more risk.
- Preferred return
- A threshold return some agreements pay equity before profits are split. It is a priority in the order of payment, not a guarantee.
- Waterfall
- The order in which project proceeds are paid out: loan first, then equity, then any profit split.
- Capital call
- A request for additional money from a project’s owners when costs run over or plans change.
- Entitlement
- The approvals that allow a project to be built, such as permits and land use decisions.
- Unit lot subdivision
- The Seattle land use process that creates individual lots so homes on one parcel can be sold separately.
How Seattle Gets Built
A monthly note from Olsen Anderson on what can be built on a Seattle lot, what it costs, and how long it takes.
This page is general education about how real estate development works. It is not an offer to sell, or a solicitation of an offer to buy, any security, and it is not investment, legal, or tax advice. Real estate projects involve risk, including loss of capital.