Hi finance gurus,
My partner and I have purchased a large parcel of land in Newcastle NSW which we are in the process of subdividing into 8 large lots each approximately 1500m2. We purchased the property using a corporate trustee linked to a discretionary trust. We borrowed the full purchase price and offered another investment property which was owned outright as security to achieve a LVR at about 78%. The loan has been provided by Colonial via a professional package and we are currently paying 7.37% IO.
We have a surveyor working on our DA at the moment and it should be lodged in the next week or so. Fingers crossed we will have development consent within 6 months but we are not holding our breath!
Once we receive development consent the intent is to market the blocks and have at least 3 contracts signed with a 6 month settlement subject to completion of construction (dependent on construction time-frame). At this point we are going to need additional finance to fund the construction phase which may be in the vicinity of $500k. We are more than confident of a favourable valuation based on sales of land in the adjacent development.
We would appreciate any recommendations or personal experiences regarding construction loans.
Thanks in advance.
Gus[wacko]
Gus
Not exactly sure what the question is but am assuming it is whether you could obtain development finance on this scenario.
As we dont have any actual figures it is difficult to give an exact answer but if you work on rule of thumb being that the lender will go upto 70/75% of Gross Realisation then you will not be too far away.
Not sure i would structured it with CBA as a X collaralised loan as they are a little expensive on the development finance front but you will just need to work with them given it is too late to refinance.
Construction finance is not that difficult to obtain from the right lender as long as the LVR is within their boundaries and you ahev some pre-sales or past experience.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
Thanks for the information Richard.
Presently we have borrowed approximately 30% of the gross realisation but need that to go to about 50-55% to complete the development. This would include the council contributions of about $20k per block. I assume that council contributions would be borrowed using the construction loan product also?
When we receive development consent what is our next step? Should we seek a new valuation or just leave that for the lending institution? What information will the bank require? I have read that the development consent and a construction quotation are required. Is there anything else?
Cheers,
Gus
Gus
This would include the council contributions of about $20k per block. I assume that council contributions would be borrowed using the construction loan product also?
A) Yes dependant on timing might need to be paid by you initially ans then be reimbursed.
The Bank should have valued the property with the DA in place however will need a copy of the BA to work off end values.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
I thought I would shed a little more light on our deal just to get some opinions on figures we have been quoted. Also would be nice to get some constructive feedback and hopefully a warm and fuzzy feeling that we are heading in the right direction by those that know alot more than us. Although we have invested in property previously this is our first attempt at a subdivision.
The property – 9 acre lot to be subdivided into 8 lots, located about 15 mins south west of Newcastle city in well established suburb.
Lot yield
1 lot zoned environmental living approx 1.84 ha
7 lots zoned residential between 1300 – 3000 m2The figures
Purchase price 575 000
GST 57 500 (refunded)
Acquisition costs 30 000
Holding costs (interest on 645 000 loan with Colonial) 100 000 based on 2 years
Surveyor and other professional costs 70 000
Council contributions 160 000
Construction and provision of services 320 000
5% contingency 65 000
Selling costs 80 000
Approx total cost 1 480 000 (175 000 / lot)We will need an additional 450 000 for the council contributions and construction phase upon development consent.
Sales of similar blocks in the adjacent subdivisions have been around 280 000+. Estimated cash back not considering tax etc should be 700 000+.
The DA will be submitted to council this week and we have planned for a 12 month approval process. We have a good team of surveyor, REA, solicitor and accountant.
What costs have we missed and how does the deal sound? Is the margin acceptable by normal standards?
TIA
Originally posted by gus1970:Hi finance gurus,
My partner and I have purchased a large parcel of land in Newcastle NSW which we are in the process of subdividing into 8 large lots each approximately 1500m2. We purchased the property using a corporate trustee linked to a discretionary trust. We borrowed the full purchase price and offered another investment property which was owned outright as security to achieve a LVR at about 78%. The loan has been provided by Colonial via a professional package and we are currently paying 7.37% IO.
We have a surveyor working on our DA at the moment and it should be lodged in the next week or so. Fingers crossed we will have development consent within 6 months but we are not holding our breath!
Once we receive development consent the intent is to market the blocks and have at least 3 contracts signed with a 6 month settlement subject to completion of construction (dependent on construction time-frame). At this point we are going to need additional finance to fund the construction phase which may be in the vicinity of $500k. We are more than confident of a favourable valuation based on sales of land in the adjacent development.
We would appreciate any recommendations or personal experiences regarding construction loans.
Thanks in advance.
Gus[wacko]
[suave][cowboy2][cowboy2]
Church of The Holy Smokers
[email protected]
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