Finance for small developments
- Thread starter cimbom
- Start date
Hello,
Just wondering what the process would be for getting finance for a small development (2-3 townhouses on a block - keeping one and selling the others)? How much deposit would be required and is serviceability determined the same way as normal mortgages?
Would be good to do someday
80% LVR for 3 units (80% of land+building costs) and possibly up to 90% for 2 units.
what Aaron said
pretty much resi terms and you can get to 90ish for 3 if all the stars line up
ta
rolf
pretty much resi terms and you can get to 90ish for 3 if all the stars line up
ta
rolf
With LMI some will go to 90% but on my latest I was refused LMI because I was deemed too commercial. In this instance I've had to go 80% LVR so I didn't need to do LMI
I'm using a LOC for the 20% from another property.
Serviceability is the same - your income. If you have a Building Contract then some will use future rental income as well for serviceability.
I'm using a LOC for the 20% from another property.
Serviceability is the same - your income. If you have a Building Contract then some will use future rental income as well for serviceability.
Just had one approved and settled at 90% for a forum member on 3 units and he was selling two post completion and retaining 1.
LMI capitalised and done at .8% discount to the SVR.
Whilst ii agree that some will take potential rental income consideration most will prefer to see it wash its face without.
LMI capitalised and done at .8% discount to the SVR.
Whilst ii agree that some will take potential rental income consideration most will prefer to see it wash its face without.
We just had a WBC loan approved at 80% LVR for our latest duplex block of land though we are using our own cash to build. They used future rental income on both houses to beef up our serviceability.
That isn't a construction loan!!! They are just giving you permission to demolish/build on your land.
I know that.
I was just letting people know that WBC were happy to use projected rental income from 2 houses that don't yet exist (no DA approval) in order to beef up ones serviceability to buy a duplex site. Folks like me need all the help we can get!
xcellent outcome
ta
rolf
I was just letting people know that WBC were happy to use projected rental income from 2 houses that don't yet exist (no DA approval) in order to beef up ones serviceability to buy a duplex site. Folks like me need all the help we can get!
Just cos you chucked the future rental number in there doesn't mean they used it. The credit analyst doesn't exactly tell you what figures they input into the servicing calculator. If it services without the future rental then it will be accepted regardless.
Ta Rolf.
Maybe not but he made me get official rental appraisals for the planned houses and told me that we can't get the loan without the rental figures so it's hard to imagine them not using the figures.
That's surprising (the use of future rental that is) when they are not controlling the process. You may not ever build them but i suppose your land loan has a clause that it must be built on within a year or two as is the apra requirement for a resi land loan. Did they also perhaps make you show them the signed construction contract?
Well done on getting it through regardless.
Well done on getting it through regardless.
There is no construction contract. We are funding the build. Just a block of land. We have submitted a DA for a dual occ but he didn't ask to see it. No approval expected until late January. The front page of contract for sale was provided along with 2 rental appraisals and 2 yrs returns.
May have been successful because we have a current loan with WBC which was handled by the same local branch loans manager?
Did a similar thing with St George many years back, we had to use a tiny bit of the potential income to get a line of credit the applicants were going to use for the purchase and construction. 80% LVR (of land value).
while they had the build specs, so we could have done a construction deal, they wanted to control the process.
while they had the build specs, so we could have done a construction deal, they wanted to control the process.
Possibly a silly question for someone on a steep learning curve:
Having read the Mona Vale thread, MichaelW spoke about his complicated loan structure involving a company, a trust and his personal loan, where his company purchased(?) units of his personal loan to undertake the construction. Is that necessary if you want to borrow for build + land costs? Or does a simple personal loan work in most instances under 4 units (as said in earlier posts)?
Will banks lend on a feasbility study for build costs and will they add (say 10%) a contingency as per your FS?
One of the most confusing parts of MichaelW's plan was that he didnt want to sell them which would mean potentially that the debt would still be in the company's name. Unsure of the consequences of that arrangement.
Thanks
AM
Having read the Mona Vale thread, MichaelW spoke about his complicated loan structure involving a company, a trust and his personal loan, where his company purchased(?) units of his personal loan to undertake the construction. Is that necessary if you want to borrow for build + land costs? Or does a simple personal loan work in most instances under 4 units (as said in earlier posts)?
Will banks lend on a feasbility study for build costs and will they add (say 10%) a contingency as per your FS?
One of the most confusing parts of MichaelW's plan was that he didnt want to sell them which would mean potentially that the debt would still be in the company's name. Unsure of the consequences of that arrangement.
Thanks
AM
Savings or equity usually.
Capitalising interest is a form of equity use
ta
rolf
Capitalising interest is a form of equity use
ta
rolf
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