Hi, have a development approved for 30 unit site and pre sales in hand, next step is to deliver the proprties. My question is, with 75% or more in pre sales can I obtain the finance to complete and fully fund the project? Which Lenders would be keen to Fund and at what Percentage rate% until settlement occurs. Some personal finance may be available but I prefer to use other peoples money.I feel they may be all sold soon.
hi fast track
couple of question
1. What form are the deposits in,cash put calls deposit bonds etc
2. Are they all arms lenght purchasors ( no similar names, or 30 in the same name)
3.Is the site raw, da, cc, or under construct
4. Why not using the current finance company.
5. Why is the property selling with such a high pre sale content.
6.Who is the builder and what type of finish.
7.Address not the number but were.
8. Cost of land and build cost
you can post here if you wish or take it of line and send it to me
This maybe the best deal avail but unless you crunch the figures and look at the project nothing is heaven.
give you an example I went to yesterday.
30 town houses in newport syd
land 7.9mil option
build 7mil
resale 30mil
great drove 3/4 hr to site great site opp water walk to the local pub (i’m in heaven)
went to pittwatter council spoke to the lady she introduced me to sarah.
sarah is the angel from hell because she is the person respossible for all seep5 developments
resale just went thru the floor to 15mil.
look at the figures.
the petrol cost was more then you would make out of this deal.
all is not what it seems untill you do all your paperwork and check everything.
but post or send it and let me have a look.here to help
Having worked for Westpac (NZ) in their specialist Property Finance Unit I make the following observations (assuming Westpac NZ and Westpac Oz work the same way)
When financing a commercial property deal (ie anything which is for making money – not as a residential purchase) the banks look for 3 ways out (in no particular order).
Sales/ presales
Interest servicibility
Mortageee sale/ bankruptcy etcSales/ Presales
Lets say you can build 10 houses on a block, including land aqusistion costs, permits etc etc for $1.4m and you can sell them for $200k each (after sales costs etc). If you have sales for 7 then – easy – your in as 7*200k = 1.4m. You now own 3 properties unencumbered which you can either sell for your profit, hold onto for an income stream, borrow against for future work or a mixture of all 3.
On a development like this, depending on your history of this type of work, the builders reputation etc then you can probably go for max 60% geared.
If you sold only 1 property and applied the full 200k to the outstanding debt you would now have 1.2m debt with 1.8m security – 67%.If you sold 2 then 1m debt 1.6m security (62.5%) and if you sold 3, .8m debt, 1.4m security 57% geared.
So in all reality you would only need to have presales or 30% of the properties for the bank to look at the deal.
Interest / Serviceability
However. You need to prove you can pay the interest bill (usually an income of 1.5x the interest bill) or you could choose to capitalise the interest (add to the loan). In this case, 3 properties sold would leave .8m debt which at 8% would be $64k/yr interest. In this scenario you would have ~7.5 months to either sell another unit and remain under the 60% limit, find some more security to give the bank or start paying the interest out of cashflow – usually it doesnt make to much difference to the bank which you do.
Mortgagee/bankruptcee etc
Now the 3 properties that you have presold must be arms length. You cant sell 1 to your mum, 1 to your dad and 1 to your brother, because if they default the bank is in a tricky situation where they now have to get you to sue your mum, dad and brother when they default on finishing the deal and that is not something most people like to do!
Bear in mind that if you sell the first property for $190k net then the remaining properties are now all valued at $190k not $200 therefore your presales needs to go up.
Now in your case you say you have 75% presales – given that (and assuming that they are unconditional and at arms length), I would assume that most major banks will fall over themselves to lend you the money.
If you want help with this then email me and Ill see if I can help.
Cheers
Frog
Conducted a full Feasibility Study…Question was Other Peoples Money on a 75% Armslength Sales-Unconditional. Cheers
If all stacks up i can’t see a problem with financing a deal like this.
Cheers Richard
Ph: (07) 3720 1888
[email protected]
http://www.yourstatefinance.comIP funding and US property finance
our specialityRichard Taylor | Australia's leading private lender
Hi FAST TRACK
If you’ve Conducted a full Feasibility Study.
and you’ve got arms lenght pre sales I would be aiming at a 100% lend at 8.75% and there are a couple of lenders that will lend on this.
Contact a couple of commercial brokers,Simon pulp finance can organise in sydney they charge 2% commission to organise there deals.
I can give you his number if need be.here to help
Finance… surely its something you would have worked out before you started pre-selling property??? Surely!!!
Cheers
Stu
I’m with Stuart…what happens if you can’t get finance,or can’t get it at a rate that makes the whole thing feasible or in deed profitable?
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