Hi all,
Wondering how the finance works for multi-unit developments.
We are considering purchase of IP which has approved Zoning for development for several units. What we would pay for the property will almost reach our lending ability on income (bank's figures, not our own).
We know we can sell subdivided/strata with just approval and plans. Do investors usually apply for finance for these costs/include them in original finance to purchase property?
IF we were considering building as well, what's the process for finance if we want to go ahead and build on this block then subdivide/strata and sell?
Also, thought I read somewhere else on forum that once the subdivision/strata titles are stamped the financial institution will re-value each property and create individual loans for each. Am I interpreting this correctly?
All a very interesting learning curve, so much to learn,
DD
Development funding works 2 ways depending on the strength of the overall deal:
1) You would obtain upto an 80% lend to acquire the site (more likely 70% these days) and the upto 80% of the construction costs. You would need to fund the development approval, council costs and BA from your own pocket.
Once the construction has been completed (and at these figures you would need to demonstrate you could cover the interest each month) the plan of subdivision stamped and individual Titles created some lenders may look at switching the loan to residential rates depending on the number in the block and the concentration of units you will be keeping and the number that have deposits held on them or are under Contract.
2) You would obtain a loan of upto 75% of the Gross Realisation of the project net of GST which in some cases could be nearly upto 100% of the cost.
The later would be limited to non bank speciaist lenders and would attract a higher rate and set up fees.
Guess it all depends on how profitable the deal is.Richard Taylor | Australia's leading private lender
have you managed to secure the finance yet?
I heard that it is getting difficult to secure the finance for the block o units?We have pre-approval for purchase of property, haven't made any offer yet. Interestingly we have approval for 100%+ from bank. We can fund development approval etc costs.
Option 2 above that Qlds007 described is what seems to be likely scenario for us IF we choose to build ourselves.
IF we purchase we will probably sit on the rental until we learn enough to be confident in making a decent profit for the effort/time. This might coincide with development approval being granted.
As described in many books/forums, it's the fear that's making us balk. Looking at making an offer soon subject to getting feasability done.
Richard, are you saying a bank would NOT look at the second stage finance? Why is that? Do they not do Gross Realisation calculations?
drs
Yes thats right Bank lend against cost not against GR.
Richard Taylor | Australia's leading private lender
how do you get 100%+ approval??
Pre-approval might not mean anything though?PPOR as security
This one's been snapped up, weren't quick enough
so onward with the search. Will be interesting to watch out for what happens to it in the future.Wasn't meant to be ours.
Thanks for all your info sharing
Dwhere about was it?
Kelmscott.
so onward with the search. Will be interesting to watch out for what happens to it in the future.
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