Hi,
I have a mortgage on a raw site with the potential for 3 townhouses. I would like to develop the property and have no cash at hand, there is about 12% return on this project.
What do you suggest my options are to obtain finance and who would you recommend.
Thanks
What will be the valuation:
1) As LVR against land purchase price and construction costs.
2) Gross Realisation.
Will the loan be done on a full status on lodoc basis.
Richard Taylor | Australia's leading private lender
Also in addition to Richard's post above, lenders usually want to see a 15-20 % return on the project end value. Check your feasibility and if it still returns 12 % you may want to consider whether it is viable for you to proceed.
Ensure that you've allowed a 5 % contingency on the construction cost for your project.and if your figures of 12 % have allowed for this and are on the conservative side, see where you can cut some costs (without ruining the project) to bring your feasibility to around 15 %.
As Michael said, 12% is very tight. Personally I wouldn't touch it as the risk/reward ratio is simply not there. In saying that how have you derived 12% (is it after factoring in interest, holding costs, all development costs, purchase/sales costs, legals, subdivision, design, approvals, council contributions etc)?
I would recommend doing a dcf as well as a secondary methodology (development model/direct comparison) to check your numbers.
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