Say I borrowed 95% value of an investment property and I was looking at knocking it down and developing it…
I doubt financial institutions would just let you knock it down and rebuild, as the house is their security, so how does the procedure normally go if I own a property on a mortgage and want to develop it?
Brizza
Most lending institutions would treat it as a development loan and therfore lend against Gross Realisation.
We often do developments where we may borrow 100% of the purchase price and then ongoing construction or developments costs subject to end value.
Sometimes the Bank will want you to put in your “hurt Money” first but that all depends on other equity or experience.
Cheers Richard
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http://www.yourstatefinance.comIP funding and US property finance
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As your equity gets stonger you may fine you are able to borrow 100% + for your Re Development’s.
We dorrow “all” costs of a development.
Regards.http://www.owner.com.au
http://www.owner.com.au/phototour/listing_phototour.cfm?listingid=20440
http://www.owner.com.au/phototour/listing_phototour.cfm?listingid=21772
http://www.owner.com.au/phototour/listing_phototour.cfm?listingid=22315hi Brizza
Not sure If I can answer your question but the answer is basically yes.
You can lend to develop it depends what are you looking at putting on the site.
I like that qld007 has done 100% gross realisation lends and would be very interested in the banks, lenders or private lenders that will do this I have a couple of deals that I would love to pass past that group.
And westinvest send me a email if you do gross realisation lending I couldn’t see it on the website.
Post what you are looking at developing and I will give you my advice,
I start at 2,000,000.00 and stop at 10,000,000.00.As for letting you knock down.
I look at it from a different angle but I see it from your point of view.
There are many ways of getting finance you just need the right person to apply correctly for the correct type of loan.here to help
You’ll probably get a better response from a broker who does construction finance than a bank (unless you have a previous track record.)
100% construction finance is not unusual but most lenders will look at Gross realisation (end value) of the development before working out what they’ll lend.
Hope this helps.
Megan
Megan
http://www.propertyhub.net
Your Investing and Developing Information Hub.You’ll probably get a better response from a broker who does construction finance than a bank (unless you have a previous track record.)
100% construction finance is not unusual but most lenders will look at Gross realisation (end value) of the development before working out what they’ll lend.
Hope this helps.
Megan
Megan
http://www.propertyhub.net
Your Investing and Developing Information Hub.Roughly 20-25% minimum.
Ultimately the financier need security for the loan – that is fundamental to the borrower/ lender system.
As this is a fact in the commercial world, when the developer is preparing his Application for Finance, it naturally includes the end sales value of the development – all the units.
These Application figures include a profit of say 25% minimum. So the application really show the financier all the costs (100%)+ 25% profit, OK?
To support the Finance Application the developer will have included a formal sales valuation supporting the sales prices used in the Application.
This sales valuation (appraisal) will be rather conservative, because Valuers (Appraisers) don’t like being sued by banks if the actual sales prices achieved are lower than the valuer’s estimate.
The financier has to be prepared to accept these figures as fair and reasonable as security for the loan.
If that is the correct appraisal of the deal, it means that the borrower has no equity in their deal – it’s all being done on borrowed money.
That then can only mean that the development/sales market must be very strong + the borrower must have an excellent development record of successful and profitable projects.
In addition the financier may have additional security over other property the developer may own … like his home.
Under this type of deal, you may ask how the developer gets his profit, if he must pay back all the cost + all the profit to the bank.
Well I did say that the sales valuation was conservative … so that keeps the bank happy from a security point of view, but the developer must have known that he would sell the units for higher prices.
In addition he would have added a cost contingency for his own safety. If he did not have to spend the contingency, then that adds to his profit.
The best advice I can give you is to see one of the lenders sales staff and get them to spell out their system. After all a salesman wants new clients and you may become one.
Remember banks and financiers only have one product to sell – MONEY – it’s a commodity, just like a car and a washing machine.
There is no mistery about it – these organisations have sales staff and their job is to bring in new business. Get them to come and see you and present their product.
Then do the same with a number of lenders – record all the data they give you – don’t trust memory – ’cause when you come to make your own application, you won’t have all the info at your finger tips.
Invest in Knowledge First … it is the cheapest of all the decisions you make.
There is an excellent resource written by an australian expert which doesn’t cost an arm or a leg.
http://webpage.colmkille.hop.clickbank.net
Best of luck
christian
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