3 Townhouse development loan problem

I have found a land with single house which has DA for demolish and build 3 townhouse. As my goal is to sell after build, which loan is most suitable and profitable for me? I also have 2 partner and can apply for loan together.

 

Bit of a vague question - a residential loan is the general answer.

 

Not all lenders will do 3 unit construction under residential lending so firstly shortlist the lenders that will do this under their policy under residential lending (lenders such as Westpac/St George at lower LVRs, NAB @ 80%, etc). You do not want to do 3 unit construction under commercial lending - it can be very expensive. So using the right lender is very important here.

Then you need to look at other important factors such as servicing, valuations, etc.

Valuation is a big one as valuers will value in one line so the valuation will be shaded by roughly 30%. For example, say each dwelling is worth $1mil by themselves so thats $3mil in total. In one line they will be valued at roughly $2,100,000 so the bank will lend you 80% of $2.1mil including land loan. So this means you would need considerable amount of cash to fund a project.

Another thing - if your intentions are to sell all of the dwellings then lenders will ship you to commercial lending even if 3 units falls in their residential lending policy as they will deem it as a commercial transaction.

 

As Shahin said. Also the properties will need to be strata if you are intending to sell. Can you service the entire debt. If not then some of the properties would need to include rental income. If you intend to sell, check with the lender you can do this - how you structure is important to getting the loan through.

 

Well, not 100% necessary, eg. if looking to sell as 3 on 1 title.

This can be done via residential lending however if you say you want to build and sell straight away most lenders won't want to touch it as it's technically development finance and therefore becomes a commercial lend (more expensive) So any application for finance needs to be presented in the correct way from the beginning, don't recommend asking the lender if it's ok to sell.

 

I wouldn't be asking the lender if you can sell either - it might tip them off on your intentions and mean commercial. A lender cannot prevent you from selling anyway.

 

You are correct - Was just thinking inline of selling one / two not three, property needs to be Strata . Loan is initially 3 on 1 title. Once strata complete, refinance into 1 or more separate loans depending on how you want to structure debt / ownership etc.

 

Therefore, if I tell lender my intention is for living, I can make it home loan. I still have following questions.
1.Will it have any effects on the following construction loan?
2. Now the DA has no strata subdivision. If I prefer to selling them all after completion, should I do strata subdivision after completing?

 

If you haven't bought it yet then there are lots of things to consider

1. feasibility - this can be hard to do if you are just starting out and you want to make sure you understand all the infrastructure costs, tax implications (income/company tax, CGT, GST etc) and you may find that it makes no money
2. tax/legal structure - it might not be best to do it in your personal name or it might not be. Seek some legal and tax advice
3. Finance - often you will want to buy the project site with the lender who you want to use for the construction loan so seek some advice from a Broker and find out if there is an appetite to lend in the area, how much deposit you will need for the project site AND the construction loan. If you don't have enough deposit then there is no point buying the site

 

Property loans for Devs will be far harder next week than this week. Lenders probably have zero risk tolerance at present and it will get worse before it improves

 

living in 3 townhouses? hmm
I suggest you get a broker, don't go direct to the bank

Are you intending to sell all 3 to one buyer or are you going to try to sell them separately? Have you 'done the numbers' ie. feasability?
Any experience doing something like this before?

 

I am intended to sell them separately. We have builder license but do not have much experience about this kind of loan. That's why we need to make sure the finance could be ready to commence buying.

 

Builders licence - looking more and more commercial

 

But if we just need to buy it through 3 family trust or individual, does it affect? We would not show that we have the builder license as we have not got a company yet.

 

who is going to build it?

 

We would build it. But does it affect when we buy the property?
Please clarify as I know quite little about loan.

 

when applying for construction finance the borrower will need to provide the construction contract with the builder...

 

Does it mean it will not affect we buy the property using home loan?

 

no