In 2026, the budget decides the deal. Margin is won at underwriting, long before the first draw, and three pressures are testing it hardest this year: permitting timelines that now run as the market baseline, tariff exposure on core materials that shifts faster than most pro formas get revised, and carry costs that build until an optimistic exit gives way.
As a direct balance sheet lender with more than $2.2 billion originated since 2011, Bayport Funding sees these risks across the assets it manages in real time.
Market Conditions Shaping 2026 Budgets
The market backs the case for conservative underwriting. 30-year mortgage rates were holding in the mid-6% range as of mid-June 2026 and reached over 7% in September 2026, while the 10-year Treasury sat near 4.45%.
Inflation is running above 4%, and the Federal Reserve has announced a rate increase in September 2026. The lower-rate scenario many developers underwrote has faded. Per Yardi Matrix’s summer 2026 outlook, full-year rent growth is tracking modest, in the range of roughly 0.5% to 1.2%, which puts more weight than ever on exit assumptions.
The 2026 Budgeting Checklist at a Glance
Construction and permitting:
- Add 20% to 30% time buffers at the phase level.
- Include soft-cost contingencies as explicit line items.
- Confirm vendor deliverables in writing before closing.
Carry costs and exit:
- Underwrite carry costs against multiple exit scenarios.
- Align hold duration with a realistic absorption timeline.
- Treat exit fees as a fixed budget line.
Where 2026 Budgets Come Under Pressure
Construction and Permitting
Permitting delays are the baseline now in most active markets, and budgets built on old averages quietly absorb the gap. The fix is to buffer at the phase level, because framing, MEP rough-in, inspections, and final Certificate of Occupancy approval each carry their own delay risk.
Soft costs deserve the same precision. Architectural fees, permit fees, and re-inspection charges all compound as a timeline stretches, so they belong in the budget as explicit line items.
Bayport Funding’s ground-up construction financing is built for this. Draws follow confirmed phase milestones, and in-house draw authority means each completed phase is approved internally, keeping the project funded as it moves.
Carry Costs and Exit
Exit assumptions deserve the most conservative treatment in the budget. According to ATTOM, the average acquisition-to-resale timeline reached 165 days in the first quarter of 2026, up from 160 days the previous quarter, and that figure belongs at the center of the base-case hold period.
Carry costs run well past interest. Insurance, property taxes, utilities, and any HOA obligations all continue throughout the hold, so every added week of timeline carries a real cost.
A disciplined model tests three outcomes before acquisition: a best case at target ARV with full absorption, a base case with a 5% to 10% ARV reduction and a 30-day extension, and a stress case with a 15% reduction and a 60- to 90-day extension. Each should produce a minimum acceptable exit price that still covers carry, fees, and the required equity return.
Refinance-to-hold is worth underwriting alongside the sale scenario from the start. Run the numbers with Bayport Funding’s deal calculator before the budget is final.
Why Bayport Funding Identifies These Risks Early
Bayport Funding holds every loan it originates. That’s why construction overruns, permitting delays, and carry-cost surprises show up in its portfolio before they reach published market data.
That perspective shapes how the firm underwrites new deals and how it helps developers strengthen a pro forma while there’s still room to adjust. Marcia Kaufman, CEO of Bayport Funding, brings the same instinct from the borrower’s side. After two decades in institutional mortgage banking, she acquired, rehabbed, and resold distressed properties through the 2008 downturn, managing timelines, materials costs, and resale risk firsthand.
That experience informs how the firm guides developers on where budgets come under real pressure.
Build for the Environment You Are Underwriting
Budgets built for uncertainty outperform budgets built for optimism. The developers who protect their margins in 2026 treat construction buffers and carry costs as deliberate line items at origination, and they underwrite every exit against more than one outcome.
When a project involves ground-up construction, real permitting exposure, or an exit that has to hold across several scenarios, the capital behind it should be built for that environment from the outset. As a balance sheet lender, Bayport Funding underwrites, funds, and holds each loan from origination through payoff.
To talk through a property development loan, reach the Bayport Funding team at (833) 280-1826. Funding is available in as little as 72 hours.
About Marcia Kaufman
Marcia Kaufman is the Chief Executive Officer of Bayport Funding, a direct bridge lender with more than $2.2 billion in originations serving real estate developers and investors across 36 states. With over three decades in mortgage banking and real estate, she writes on market conditions, lending strategy, and what it takes for developers to execute successfully in a fast-moving capital environment.
