loan for developing question

Viewing 4 posts - 1 through 4 (of 4 total)

brendon11
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@brendon11
Join Date: 2006
Post Count: 15
June 19, 2006 - 8:10 am
Im interested in knocking down my house and putting up 3 new ones in its place, as I believe this will turn it into a cashflow + investment.
The problem is, can I afford it. I have done a loan calculator on Wizard, and going by that I could get a loan to cover all the costs.
What I am wondering is, if I get the loan, and start construction, how am I going to afford to pay this loan until I get tenants in the houses?
Terryw
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@terryw
Join Date: 2001
Post Count: 16,213
June 19, 2006 - 1:55 pm
Depending on equity, end value etc, you may be able to capitalise the interest in the loan.
Terryw
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foxyac
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@foxyac
Join Date: 2005
Post Count: 17
June 19, 2006 - 10:52 pm
Don’t forget too that the bank will be paying in progressive payments upon each stage of development so you will not be hit for the entire lump sum all at once. Also the bank will lend based on the valuation of the end product (based on seeing the plans) so if they are worth $300 ea say to sell when finished they will loan up to 95% (depending on which bank) of the total value of $900 (but that also included the original amount you bought the house/land for). You should also be trying to get tenants when you know the houses are almost complete but I guess you already knew that. I am doing the same thing so I know where you are coming from. Hope that all made sense.
Good luck!! [biggrin] Andrea
Richard Taylor
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@qlds007
Join Date: 2003
Post Count: 12,024
June 20, 2006 - 6:20 am
You might find getting 95% LVR on a $900K a little harder than you think. The loan will be mortgage insured and many lender will not go that high especially on a single lot.
3 Strata Titled units would be a lot easier to finance.
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