Questions for the Developers

Hey,

Just been thinking about a few scenario's lately and reading up on a couple of the developments around this forum. Just a couple of questions for the developers...

What is the finance structured like? Did you guys start with a couple of IP's, built some equity and then pulled the equity out to fund developments? I assume banks lend on builds, what is the criteria like?

What about servicing a development debt? If you are planning to build a 1Mil development can you borrow 80%? And do you have to have the income to service 800K w/out a rental income? Or do they look at it as if it were finished, and take an estimated rent into account?

Any decent reads to recommend about developing in Australia?

If you developed something in Sydney, and it was 6-8 apartments that you decided to keep, and the land value was over how do you mitigate land tax? or due to the development it makes it just a necessary expense?

Love to hear from you guys & girls!

Aaron
 
Hi

Hi Aaron,

Hope you are well?

I can only give you two scenarios that we recently experienced with our developments.

1) We bought land at $515,000 - Business partner and I went split the finances in half and we used 20% cash each that we both have had saved. We both where fine with a 20% deposit as we both had a bit of cash saved up.

- For the building side: My business partner is a builder so we got two building contracts drawn up and progress payments are in our favor and we both had another 20% for the building.

Usually allot of people would recommend leveraging to the hill but my partner and I believe in cash flow.

2) we will be working on a new project shortly and we are just waiting for a formal approval to engage investors to invest in a up and coming project.

If you need a hand I am more then happy to share a case stud in further depth :)
 
Gday

Most lenders will do 80% on the initial land purchase.

On the construction side of things it moves to 75% of Total Development Costs.
Costs include:
Land
Construction inc Demo
Project Demo
Contingency
Professionals
Council/Head works
Interest
Marketing Costs
Sales Commissions

Hope this helps
 
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