I have a development site with a approved DA for 3 units, the house is currently has a tenant in it. I have had quotes from 3 suitable builders and the figures came in surprisingly good. I dont wish to build them yet, but was wondering because there is equity or profit "on paper" there (ie. cost per unit is $160k, value once built $210k = $150k profit).
Is there a way that that equity can be borrowed against to invest in another property or will they only lend against it to develop the site?
cheers
Sure is if the lenders valuer agrees with your current market valuation then you can borrow against this.
Remember the valuer is valuing a block of land with a DA on it only and nothing else.
If the valuation is an oncompletion valuation then sorry nothing you can do there until you start constructing.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Wade it is quite likely that the bank valuer will value it "as is" and will ignore the value of the DA. I have seen these go either way, however more often than not the bank valuer will ignore it when instructed by a bank to value for mortgage purposes.
When you apply for a construction loan to build them then they can take the on completion value into account which would effectively include the DA value.
Hey Guys,
Does this mean that I (similar situation) will need to have an approved DA and have started building before they will consider an on completion value or are there still loans that will lend totally on final valuation numbers?
Also, if i have the units all having presales will this influence the finance?
Cheers,
Adam.It is when you apply for a construction loan that they will then use the on completion valuation. I.e. you need to have your builder / tender in place too. Pre-sales are irrelevent for residential finance and in many cases essential for development finance. As a general rule building up to four dwellings on one title is residential and any more is commercial / development.
Hi Otto,
Will i be able to apply for a construction loan using on completion valuation seeing as i am doing 4 units on one title? I know you said as a general rule, however if i came to the lenders with 4 pre-sales could i make it into a commercial development? Also, will it help as the contract i have in place for the land is subject to DA approval, so i was going to go in with the DA and 4 presales and get the lot financed. Is this totally unrealistic??
cheers,
Adam.Hi Adam,
What you are doing is right on the border between residential and commercial. You could go either way. The choice would depend on your situation, your intentions and your needs. You would really need to discuss this in detail with a mortgage broker to work out the best way forward.
Hi Otto,
Appreciate the advice…I will do.
Cheers,
Adam.
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