All Topics / Finance / End Valuation

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  • Profile photo of crittenwcrittenw
    Participant
    @crittenw
    Join Date: 2004
    Post Count: 3
    February 13, 2007 - 4:05 pm

    Hi All,

    My Bank manager and a number of other associates tell me that the end valuation of a development is in their view, based on the total cost of the development, not the final retail value of the project.
    I have also read where it can be based on the value of the finished product in the market place and that some lenders will loan against this value.

    Comments please.

    Bill

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024
    February 13, 2007 - 11:41 pm

    Bill

    All i can assume is that your Bank Manager and associates are not development minded.

    Gross Realisation lending is standard in the Development market and most institutions take this as the figure which they lend against.

    Cheers

    Richard Taylor
    Residential & Commercial Finance Broker.
    Licensed Financial Planner. Ph: 07 3720 1888
    [email protected]
    Looking for life cover – We Guarantee to beat any quote you have in writing.

    Richard Taylor | Australia's leading private lender

    Profile photo of Alistair PerryAlistair Perry
    Participant
    @aperry
    Join Date: 2004
    Post Count: 891
    February 13, 2007 - 11:51 pm

    Hi Bill,

    Richard is correct, usually banks do look at what you put into any deal, but Gross Realisation value is the most important consideration. I suggest you go to a diffferent bank, or better a broker who has a bit of experience in this area.

    Regards
    Alistair

    Profile photo of kieran56kieran56
    Member
    @kieran56
    Join Date: 2006
    Post Count: 2
    February 14, 2007 - 11:47 am

    Bill

    All the other guys are correct. The lender will usually lend between 60-70% of the GRV which should enable you to fully fund the project

    Kieran56

    Profile photo of crittenwcrittenw
    Participant
    @crittenw
    Join Date: 2004
    Post Count: 3
    February 15, 2007 - 3:14 pm

    Thanks Richard, Alistair & Kerian,

    Still using my local Bank, Richard you would know them it’s Qld’s own.
    We are a bit new to the game, did one small development (duplex)
    last year, looking to do 2 this year but it’s looking like a bit of a stretch.

    Just Listened to Martin Ayles and Steve deliver their Webinar and Martin talked about Tentative on Completion which I suppose is the same deal.

    Got the feeling that it’s generally accepted but my own bank manager and a Broker I used recently indicated that it’s only used by what they term second string lenders.

    Any thoughts.

    Cheers

    Bill

    Profile photo of Alistair PerryAlistair Perry
    Participant
    @aperry
    Join Date: 2004
    Post Count: 891
    February 15, 2007 - 11:32 pm

    Hi Bill,

    If it is a resi contruction loan, most will lend against the end value. If it is a commercial lend they will take into account the percentage of costs they are funding and the percentage of end value. This is pretty standard amongst the big banks and secondary lenders.

    Why don’t you post some details of what you are wanting to do and let us give you some more specific comments on the scenario.

    Regards
    Alistair

    Profile photo of crittenwcrittenw
    Participant
    @crittenw
    Join Date: 2004
    Post Count: 3
    February 18, 2007 - 9:23 am

    Thanks Alistiar,
    Not sure how it will stack up.

    Land 195K
    Construction Cost including allowances for inrerest etc is 555k

    projected sale is 910k.

    Construction is a Triplex.

    Cheers

    Bill C

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