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Borrowing for a Development

Discussion in 'Property Finance' started by iDex, 7th Jan, 2016.

  1. iDex

    iDex Well-Known Member

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    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! :)
     
  2. D.T.

    D.T. Adelaide Property Manager Business Member

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  3. iDex

    iDex Well-Known Member

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

    Westminster Tigress at Tiger Developments Business Member

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  5. Blacky

    Blacky Well-Known Member

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    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
     
  6. Westminster

    Westminster Tigress at Tiger Developments Business Member

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  7. OC1

    OC1 Well-Known Member

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    App fee in resi language.
     
  8. Blacky

    Blacky Well-Known Member

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    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
     
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  9. OC1

    OC1 Well-Known Member

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    They really bend one over don't they :)
     
  10. Blacky

    Blacky Well-Known Member

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    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. :eek::D:p

    Blacky
     
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  11. iDex

    iDex Well-Known Member

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    Thanks for all the advise everyone!

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

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Value

    lenders want between 25ish to 100 % debt cover depending on the deal.

    A little comes down to end servicing etc, and the overall asset position of the borrowers

    ta
    rolf
     
  13. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    +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.