Borrowing Finance to Buy, Build & Sell

A Serious Question (although it sounds stupid)..

Would the bank (or financial institution) lend you 100% of the money to develop a block of land (say in my case a knock down and rebuild of dual occ duplex) and allow you to pay back all the interest accumulated over the total duration?

I guess what I am trying to say, I have completed feasibility studies on the the sites I want to develop but with the normal borrowing power that I have, I won't be able to borrow everything I need.
I know the numbers stack up and it's lost opportunities if I just sit back and watch all these properties being bought by others.

 

Not directly

But if you had other property you could manage to do this by setting up a few loans.

 

Hi Terry

Without over complicating it and cross collateralising or any other financial set up, all I am looking for is someone to give me the funds so I can build and then I will pay them back when I sell (obviously going through the feasibility with them). Am I asking for too much here? I'm just a guy wanting to have a good old Aussie Crack.

Now I know I'm over simplifying it but that's the honest truth!

 

Yes you are asking too much!

Residential loans are meant to be long term. Banks won't like it if you plan to sell qucikly.
They will also not lend above certain LVRs
And not capitalise itnerest generally.

 

Thanks Rolf
Sounds like a negotiation needs to take place - most likely with a smaller financial institution - will probably get slammed with the interest rate and other fees but hey, thats the risk I guess!

Would anyone have any recommendations based on past experience, who would consider financing this type of structure?

 

From what I can tell, you're asking if there's a lender that will fund 100% of the project, without any additional security, without verification of demonstrating that the loan can be paid back, other than the feasibility indicating that the value of the property will increase and generate a good profit.

No lender is going to do this.


If you've got a lot of equity in another property and are willing to put this up as additional security, it might be possible to get a private funder to back the project. Think 60% LVR or lower on actual costs (not projected). The fees and rates will be exorbitant and there will be other hoops to jump through.

One of those hoops is you'll need to demonstrate that you've got the experience and expertise to actually execute the project. Just wanting to give it a shot doesn't really inspire a lot of confidence.

 

Hi Peter

I guess I'm not really asking that either, there's a lot of detail that I haven't specified in my original post such as:
- my current equity position
- building experience
- financial position

Which is obviously vital to the answer.

bottom line is, I probably need to get into the detail conversation with a specialised broker to discuss specifics.

 

Keep in mind brokers have to refund commissions if the loan is discharged within the first 18 months to 2 yaers. So they are going to want to charge you for such a service.

 

Your looking for commercial development finance.
This is based on pre sales. Once you have enough pre sales, that is off the plan contracts signed with purchasers some commercial lenders will lend you the money to build.

Usually at higher rates and usually only short term, 12 or 18 months.

Is that what your looking for?

 

Surely not for something like a duplex site?

 

Note, this sort of finance is usually to fund apartment developments and while there isn't any income verification many lenders will want to see a track record of previous development.

 

Maybe? Not my bag.

 

Thanks Tobe

 

Residential lending if fine for a duplex but requires full verification of income and liabilities to meet the lenders serviceability criteria. The scope of the project appears to be residential, but the sort of financing you're asking about is more commercial, probably in the private funding sector.

 

I presume that's not very common.. Something I may need to look at, thanks Peter