Hyperthetical Development. Some strategies please

[bicko]

Details.
We have 250,000 in LOC

Proposed development split between 3 parties.

The land is costing 265,000 plus s/duty

Villas will cost approx 150,000 each to build

Estimated costs to complete the first two villas ready for sale + buy and develop land, draft, council, stamp duty and have excavations done to build remaining 4 villas in 2 stages aprox 600k.
Looking to sell each villa for 300,000.

ANy suggestions on structuring entities/ finance to do this in the most efficient manner.

Any further info I will post as forumites ask for it.

Hope this stirs some thinking.

Cheers

 

[NigelW]

Details.
We have 250,000 in LOC

Proposed development split between 3 parties.

The land is costing 265,000 plus s/duty

Villas will cost approx 150,000 each to build

Estimated costs to complete the first two villas ready for sale + buy and develop land, draft, council, stamp duty and have excavations done to build remaining 4 villas in 2 stages aprox 600k.
Looking to sell each villa for 300,000.

ANy suggestions on structuring entities/ finance to do this in the most efficient manner.

Any further info I will post as forumites ask for it.

Hope this stirs some thinking.

Cheers

Sounds like an interesting project.

Okay, pulling on my black (negative) hat

Even with 3 of you I think you're undercapitalised to carry out this development on the figures you've described.

Given the timeframe involved can you and your JV partners service the debt without getting any rent from the properties. For a construction/development loan you could probably have the interest capitalised...but part of your funding is through your LOC. Personal cashflows need to be modelled along with the "what if" downside scenarios.

Do you need to sell the first two? And how long will that take?

Also all the usual "wot ifs" for JVs also apply.

Good luck with the project.

Cheers
N

 

[bicko]

Yes the first two villas are to be sold before the commencement of the next two.
The goal is to sell a third villa and then the parties aim is to keep one villa each. with 100k owing on it.
One avenue for finance is to contribute 60k out of parties capital and source development loan for remainder whilst capitalising the interest.

Really looking at a 2 year time frame before all six villas are completed.

 

[juzz]

Bicko,

just to be clear:

Your building 6 Units - Total Building construction Cost = 150K each=900K total building cost.
Land purchase Cost(Plus SD) = 265K.
Town Planning & Assoc Costs = 600K-300K-265K = 45K??


Total GRV = 6 x 300K = 1.8 Mill.
Securitized Loan = 60-65% GRV(Max) = 1.080 Mill

You'll probably need to raise a little extra money for the acquisition
& costs & TP & shortfall between this & costs ready to start construction
and holding time if your purchasing terms arn't favourable.
Also an interest capitization amount may need to be allocated.

Justin