Development Finance?

I have my eye on a block of land with the following accurate feaso figures. These figures are based on current market situation.

Land 260k
SD & Legals 10k
Dev Costs 260k
Interest?

Net Sales 730k

Profit 200k minus Interest holding costs

I can knock over the development in 6 - 8 mths including DA period. I have a friend who can finance it but he wants half the profit. :( He buys the land and I project manage. Obviously I will reap more profit if I can borrow the money but my serviceability makes it impossible through normal channels.

What products are out there at present that may assist me? I know it will mean higher interest rates. :)
 
I could come up with 20% pretty easily Bradsdad but as far as I know there are no conventional lenders doing nodoc or lodoc construction at present. I would imagine I could go lodoc on the land only - but then I wouldn't have the funds to complete construction.
 
Have you got 20% of the land as a deposit, or 20% of the full costs?

Development loans aren't the same as full doc residential loans. Lenders want to see that you're putting some of your own money in, that you're able to manage the project (experience helps) and they want to know what the end result is (pre-sales helps).

Payslips don't really come into it so much.
 
There are lenders offering Nodoc and Lodoc Development finance but as the guys said it all boils down to the hurt money you are putting into the deal.
 
If you've got someone willing to take all the financial risk and only half the profit, I reckon jump at it. Assuming your figures all work out, $100k in your pocket for 6-8 months work seems pretty sweet to me.

With the money you make from this development, you'd probably be able to fund the next one yourself.
 
In your calculations don't forget GST, normally for development allow about 7% of the net sales, so this will take $50K out of your profit figure.
 
We would have around 130k to throw in. In the past we have taken out investment loans with the intention of holding the houses (duplexes). We are still keen to hold onto whatever our cashflow allows so it could be funded in the same manner and be kept away from gst issues, I guess. It may mean selling another IP if cashflow becomes an issue for us.

If you've got someone willing to take all the financial risk and only half the profit, I reckon jump at it. Assuming your figures all work out, $100k in your pocket for 6-8 months work seems pretty sweet to me.

It won't be half the profit. He expects me to throw my time into the JV for nothing - so my wages for project managing would actually come out of the 100k.
 
sounds like too high a price to pay if you ask me.

6-8 months wages out of $100k sounds like you're just buying yourself a job.

tell him to find a property trust.
 
6-8 months wages out of $100k sounds like you're just buying yourself a job.

That's right BC. Although it would be a part time job as I am pretty familiar with the processes now. I could carry on with another project of my own simultaneously and quite easily I feel.
 
It won't be half the profit. He expects me to throw my time into the JV for nothing - so my wages for project managing would actually come out of the 100k.


Tell him good bye... We had a similar problem previously with a relative except - the didn't put any money in and wouldn't do any extra work but wanted half profits and wanted to select the colours and carpet etc.

When are you looking to start this new project ? No 4.



Cheers
Sheryn
 
I would have thought with a finance JV the financier cops the interest charge. So out of your $100k comes your wage out of the financiers $100k comes the interest.

I can see a problem with this as there would be no performance commitments as there would be no holding costs for the developer.

So based on your comments what management fees would be required from your side to allow for a more equitable arrangement?

Just interested to explore this.

Cheers
 
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