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Borrowing for a Development

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

  1. iDex

    iDex Active 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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    How many dwellings?
    Subdivision before or after building?
     
  3. iDex

    iDex Active 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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    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%
     
  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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    @Blacky limit fee - you mean line fee?
     
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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 Active 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.