Hi,
I'm starting to have a look at property development, and was wondering what were the requirements to obtain finance. I am look to buy land and build 2 duplexes on a site.
Site cost will be around $350,000
Sale price after development will be $350,000 per duplex, i.e. $700,000 for 2 duplexes (conservative estimate)Generally what is the LVR?
Would the LVR be different where I do not have any other property as security?
Would the LVR be different where I go in as owner builder compared to when engaging a builder.
Would it depend on how much income I had from working, or is a feasible project sufficient?
Finance are required for the land cost and construction costs
What are the requirements?
I am assuming that I will need some money up front for DA, architect, engineers fees before I can obtain the loan.
I am going in without a development track record, and did not want to put in additional security if that can be avoided.This will help me to get a better idea of how much capital I need before I can begin.
Thanks for your help.
Generally the bank will look at your security, current job, cash flow, or business, experience or do you have a project manager on board and whom your team is, plus they will also look at feasibility.
I am doing a few at the moment and the loan has been I tip in 30% of all costs and the bank is funding the rest and capitalising the interest also. Yes you usually need $$ up front to do all the da, professional fees.
Normally I do a full report per property – site analysis, feasibility, and cost projections of all the professionals and get a draftsman to do an impression and some draft concepts- then I get my broker to see where I can secure the funding, before I do D/A or spend much money. I do all of this before I even buy the land, as no use doing DA/ Architect, engineer if you cant get the funding to develop, then your stuck with a site. Hope this helps a bit- Kylie
Unfortunately you will not get mortgage insurance on the loan so that means the lvr will be less than 80%.
Secondly the other issue you will have with your average lender will not allow multiple dwellings on 1 Title so you are then in the area of development financiers whose criteria is a lot more stringent.
In essence you are more likely to be restricted to a percentage of land and a percentage of construction costs subject to income serviceability and suitable asset base.
Certainly in the current climate the development market is not as it used to be.
Richard Taylor | Australia's leading private lender
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