All Topics / Finance / Development finance required

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  • Profile photo of wullahwullah
    Participant
    @wullah
    Join Date: 2004
    Post Count: 12

    I am looking to fund a five townhouse development in the northern perth suburb of Joondana. Presently, the block is not yet on the market and hasn’t been subdivided though we can purchase it as long as we can guarantee the finance.

    We are estimating that the entire project will cost around $1.6 to $1.8 million though thorough costing has not been completed. We intend to purchase the block, subdivide then go ahead commence pre-selling the townhouses before we start building.

    How can we gain finance for this project with little to no equity in our current portfolio (maybe 50k)? What kind of rates can we expect to pay?

    forwards ever
    backwards never!!

    Profile photo of MortgagemanMortgageman
    Participant
    @mortgageman
    Join Date: 2004
    Post Count: 164

    Hi Wullah,

    There are a couple of stages in funding a project such as this. The first step is the purchase of the land, for which you could probably look at a 70% lend. You will then need to get your plans and subdivision approved by council. Then there is the development portion. It is impossible to give you indicative rates as these will vary wildly depending on factors such as your experience, the expected returns on the project, the area, the number of pre-sales and whether you require a second mortgage. There are sharks lenders that will lend on just about any project but you can pay very high rates (up to 15% on a first and 25% and higher on a second). If you have solid pre-sales and equity in the project you can get much more reasonable terms. If you have little or no equity in the project currently, I suggest you look for an equity partner as going the route of second mortgages and private finance can kill the deal due to the high rates. Hope this is of some help. Good luck!

    Kind Regards,

    Cameron Perry
    Finance Director
    Perry Financial Strategies
    Level 13, 30 Collins St
    Melbourne VIC 3000
    Ph (03) 9662 1999
    Fax (03) 9662 2044

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