I'm just wondering how much cash you actually need to fund a development from start to finish (assuming you can get the required amount of finance of course). Consider the following hypothetical situation:
Land: $500K
Purchase costs: $25K
Build: $700K
Interest rate: 5%
Holding period: 18 months
Loan deposit: 20%
Build deposit: 20%
Holding costs (= total loan * 5% * 1.5): $72K (this is an overestimate as I'm fairly certain you don't have the full construction loan from the get go...)
Total cash = Deposits + purchase costs + holding costs = $337K??
Questions
- Can you borrow for the purchase costs to reduce the cash required for the development?
- What %age do you typicall borrow for a construction loan and does this have a different interest rate?
- Do construction loans incur LMI and if so and what percentages?
- Are there any other things I've missed that would increase the cash requirement, and if so, can they be capitalised into the construction loan?
Cheers
Land: $500K
Purchase costs: $25K
Build: $700K
Interest rate: 5%
Holding period: 18 months
Loan deposit: 20%
Build deposit: 20%
Holding costs (= total loan * 5% * 1.5): $72K (this is an overestimate as I'm fairly certain you don't have the full construction loan from the get go...)
Total cash = Deposits + purchase costs + holding costs = $337K??
Questions
- Can you borrow for the purchase costs to reduce the cash required for the development?
- What %age do you typicall borrow for a construction loan and does this have a different interest rate?
- Do construction loans incur LMI and if so and what percentages?
- Are there any other things I've missed that would increase the cash requirement, and if so, can they be capitalised into the construction loan?
Cheers