Hi there,
I'm interested in doing a development project and was just wondering if someone could tell me how the finance would work on a development project. Is it the same as buying a residential property you put down 20% of the project cost and the bank provides the rest or does it work differently? I've also heard that there are some finance products out there that you can delay interest payments til the project has sold, is this the case and if so which financiers provide these products?
Ernest
All depends on the size of the deal total loan to value, your other assets and ability to service.
If it is a small residential project of say 4 units and less then Yes you would get be able to get upto 80% of land costs and 80% of ongoing construction (with a few parametres). Anything over 4 and you start to get in the domain of the specialised lender.
Interest capitalisation is available but all boils down to the strength of the deal and the overall lvr.
Richard Taylor | Australia's leading private lender
Thanks, Richard for your response.
So in other words, if I was to buy a house on a block for $300K and then knock it down and build another 3 units which costs say$450K. I would need to put down $150K as a deposit and the bank would give me the remaining 600K?
Is it also possible to get finance on the completed project valuaiton, so say the completed project is worth 900K, get a loan of 720K?
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