Hi there, first post for me but have long been lurking...
Firstly a bit of background for my current situation and development proposal...
I have been looking at developing a block of land for which i have a holding deposit on to put a 4 bdr 2 storey house (260 sq.m) and detached unit (120 sq.m) on a single block under a strata title. Have checked with council and have consent to the concept so no problems there.
Drafted up the plans and went to tender to all the usual project home builders. Needless to say the tenders came back way too high and basically made it a nil profit investment. Going by the general rule of thumb of 20% profit for a development feasibility i think it is achievable if we can build it ourselves (im a PM by day so well within my capabilities and JV partner is architect). The headline numbers are as follows
Land = 290k
build = 360k (@ $950 per sq.m)
additionals = 70k (interest, surveyor, solicitor, council, s.94, fencing, driveway etc)
End Value of development = 550k (house) + 320k (unit) (conservative)
Everything is covered in the feasibility study including 5% contingency and interest holding costs (6 months)
After doing all the due diligence the hardest part for us has been obtaining finance. Residential finance generally only lend the build cost + Land value but as we are trying to build ourselves will not lend anymore than 60% of this value. Will a commercial loan help in the fact that we can borrow the entire development costs? Any advice in this regard would be helpful. Together my JV partner and I have about $120k in cash as a deposit.
Is it perhaps feasible to add a 3rd JV partner to inject some cash so the banks will lend but eventually diluting our profits?
Any advice will be appreciated (sorry for the long post)
Firstly a bit of background for my current situation and development proposal...
I have been looking at developing a block of land for which i have a holding deposit on to put a 4 bdr 2 storey house (260 sq.m) and detached unit (120 sq.m) on a single block under a strata title. Have checked with council and have consent to the concept so no problems there.
Drafted up the plans and went to tender to all the usual project home builders. Needless to say the tenders came back way too high and basically made it a nil profit investment. Going by the general rule of thumb of 20% profit for a development feasibility i think it is achievable if we can build it ourselves (im a PM by day so well within my capabilities and JV partner is architect). The headline numbers are as follows
Land = 290k
build = 360k (@ $950 per sq.m)
additionals = 70k (interest, surveyor, solicitor, council, s.94, fencing, driveway etc)
End Value of development = 550k (house) + 320k (unit) (conservative)
Everything is covered in the feasibility study including 5% contingency and interest holding costs (6 months)
After doing all the due diligence the hardest part for us has been obtaining finance. Residential finance generally only lend the build cost + Land value but as we are trying to build ourselves will not lend anymore than 60% of this value. Will a commercial loan help in the fact that we can borrow the entire development costs? Any advice in this regard would be helpful. Together my JV partner and I have about $120k in cash as a deposit.
Is it perhaps feasible to add a 3rd JV partner to inject some cash so the banks will lend but eventually diluting our profits?
Any advice will be appreciated (sorry for the long post)
