Hi Everyone,
My family and I are wanting to do some development in Clayton, Melbourne. I am looking around for development finance and assessing what the banks are offering. I have spoken to a few banks (ANZ, HSBC, Westpac) and the indications are that:
– Presales are required
– Lend up to 65% of end valueI have heard that there other insitutions that lend up to 80% of end value, with no presales requirements. Is this still true currently, and who would these institutions be?
FYI, a deal that we are looking at now have the following:
Expected land purchase price: ~$380k
Development Cost: $650k
Sales: $1.2M
Expected gross profit: $150kThanks for your help,
TKWhen you say development, what are you talking about? ie one house, a duplex etc.
There are banks that lend on end value. Generally up to 75-80% may be possible with some major banks, 65% with private type lenders.
Terryw
Discover Home Loans
[email protected]
Send an email to get my newsletter.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
You Gross profit margins look a little skinny for my liking but Yes 80% of end valuation is still available with No proe-sales.
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
The development that we are thinking of is construction of 3 townhouses. Our estimates have been quite conservative – we don’t believe the profit margin would be lower than 150k.
Which are the banks that are able to lend to 75-80% end value?
Thanks,
TKdoes your $650k in development cost include interest?
Will the land already have permits to complete the dwellings or will you be having to do that yourself. If so, that will take some time and you’ll be paying interest on the $380k of land for a period.
if you haven’t included the buying costs, subdivision costs and interest costs then there’ll be hardly anything left in profits.
as for the finance, you’d want to do your research first. banks say one thing then do another. i’ve heard nab is pretty good with dealing with this type of thing.
often banks end value may not be what you’re end value is if you know what i mean. they need to be cautious.
To be honest NAB are probably one of the worst lenders when it comes to exceeding LVR’s on Commercial deals especially development deals with no pre-sales.
They will not lend against GR and are very picky on the clients serviceability and experience levels.
Definately a No Go area if the deal is tight.
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
The 650k includes interest, subdivision, demolition, buying, selling costs, and a contingency of 5% (of construction cost).
I have spoken to the following banks:
– HSBC
– St George Property Finance
– ANZ
– Westpac
So far only St George is willing to do the deal with no pre-sales, however they don’t lend based on GR. I will be speaking with Suncorp.I heard a friend said that BankWest and Bank of QLD may be worth talking to. Has anyone (from Melbourne preferably) worked with them before? Would you recommend any other banks?
Thanks,
TKwithout interest my costs come in at $650k for the process of getting the land from a block of land to having all permits, clearing site, selling costs, construction, contingency, etc.
you also need to consider if you can get a block that will fit 3 units in clayton at that price. I think maybe mulgrave, unlikely clayton.
do some very extensive spreadsheeting and feasability before you start chasing banks for money.
my numbers calculate after your interest costs you’d be lucky to get close to $100k out of this $1m project. very risky deal by the looks of it. if it was a $500k project and you were getting $100k then it might be worthwhile.
in this situation you will need to put up some equity to be able to get the money from a bank. also very unlikely on the numbers that you have provided that they would capitalise your interest. you’ll need to make repayments on the borrowed funds.
also, in regards to st george, re-check the status there.
i’ve recently had some problems with their lenders in regards to construction and two brokers have now advised me of changes in some policies there in relation to certain things. Have moved to westpac for this work becuase st george was like beating your head against a door.
St G can lend around 75% on end value in some circumstances. Bankwest 80%, La Trobe 75%.
Terryw
Discover Home Loans
[email protected]
Send an email to get my newsletter.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Everyone,
Just met with our town planner last night. We won’t be able to fit 3 units on the site – all because we are 4 feet short in the frontage!
Thanks for the advice on Bankwest – I will pay them a visit.
Thanks,
TKIf you are dropping back to 2 units you should be able to go to 80% LVR quiet easily and the rates will be a lot lower.
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
You must be logged in to reply to this topic. If you don't have an account, you can register here.
