Borrowing for a Development

Hi PCers,

I am in the midst of trying to figure out financing for a group/multi-dwelling development project and would appreciate any help!

In general, what interest rates are banks offering at the moment for lets say a $1-1.5M commercial loan at 50% LVR (total development cost ~$2.5M).

Which banks would be recommended at this loan value?

Thanks!

 

How many dwellings?
Subdivision before or after building?

 

Hi DT, looking at about 8 dwellings with subdivision before building.

 

I'd be guessing at somewhere in the 6s but its all risk ratios. The better they like you (your experience), your builder, the suburb, the product and the timelines the nicer the rate.
The reality is anywhere from 5.5-8%

 

Sounds do-able.
You would probably be looking at interest rates around 5-5.5%. Add in a 1% limit fee. So total cost somewhere around the 6-6.5% mark.

You would need pre-sales at that level - or be able to demonstrate servicability for the total debt.

Blacky

 

@Blacky limit fee - you mean line fee?

 

App fee in resi language.

 

Sorry - typing quicker than my brain is functioning.
App fee is in addition.

I meant line fee. Which is a % paid on the approved limit.

Blacky

 

They really bend one over don't they

 

With your shoe laces tied together...

If they are really good, you bend over.. and then you thank them for providing such a great service at the end.

Blacky

 

Thanks for all the advise everyone!

Would pre-sale be a certain number of units that needs to be sold or a certain $ value?

 

+1.

Outside of specific deal factors influencing the finance options - it also comes down the price you're willing to pay. Full pre-sales may allow you to shave off costs in rate and fees - it's all a balancing act.