Seeking help for duplex construction cost

[Riel]

Hi guys! I am thinking of buying a block of land and build a duplex on it.I have no experience about development at all. If I want to buy a block of land at around 1 mil mark and do a construction loan for around 600k, how much cash do I need to have? Thanks for your help

 

[D.T.]

Depends on how you set it up and what land vals are like in the area.

You may be able to buy block at 80-90%, meaning you need 10-20% of the block price. Then, divide it using your own money (30k depending on state or council) and use the value of the newly created blocks as equity towards getting a loan for 100% of the construction costs. This is how I'm doing mine right now but your deal and circumstances might be different.

There's many other ways of setting it up though. Best bet will be to talk to a broker who has done this before and can walk through what's best for you.

 

[Riel]

Depends on how you set it up and what land vals are like in the area.

You may be able to buy block at 80-90%, meaning you need 10-20% of the block price. Then, divide it using your own money (30k depending on state or council) and use the value of the newly created blocks as equity towards getting a loan for 100% of the construction costs. This is how I'm doing mine right now but your deal and circumstances might be different.

There's many other ways of setting it up though. Best bet will be to talk to a broker who has done this before and can walk through what's best for you.

Thanks so much!Learnt a lot from you.I have about 300k in the pocket,just concern if it is enough for the other charges or not...

 

[DaveM]

To be safe work off 80% of land cost and 80% of developed value for lending. That way you dont have any nasty cashflow surprises if the lender or valuer wont play to your numbers.

This also ensures you maintain your minimum 20% margin on end value since its your cash you are playing with.

 

[Riel]

To be safe work off 80% of land cost and 80% of developed value for lending. That way you dont have any nasty cashflow surprises if the lender or valuer wont play to your numbers.

This also ensures you maintain your minimum 20% margin on end value since its your cash you are playing with.

Thanks Dave!Can I borrow other costs from construction loan?

 

[mflying]

Hi guys! I am thinking of buying a block of land and build a duplex on it.I have no experience about development at all. If I want to buy a block of land at around 1 mil mark and do a construction loan for around 600k, how much cash do I need to have? Thanks for your help

you need to factor in soft cost like DA, CC, subdivision cost, contribution and authority fees and charges

around 100k.. you will need to fund above out of your own pocket.


600k for duplex may be cutting it to fine for actual building cost.. i allow another 50-80k on top of that.

 

[MattADL]

Slightly off topic, but what does a bank secure the construction loan against? It it just secured again the house, in stages, as its constructed?

 

[D.T.]

Slightly off topic, but what does a bank secure the construction loan against? It it just secured again the house, in stages, as its constructed?

Valuer looks at plans and spec and is secured against the block / end product.

They release funds out in stages to protect themselves (and to an extent the investor)

 

[MattADL]

Perfect, thanks for the help