Development finance

Hi all,

I’m having about 7 blocks of residential land on separate title in postcode 6722. I’m planning to develop 7 with detached houses. Land is owned outright. I’m willing to get finance on basis of development of these blocks. Does any lender consider this 1) postcode 2) under residential funding 3) include potential rental income for borrowing capacity. If not residential, will commercial lender consider this?

 

Are you developing them one after another? Are the blocks adjacent to each other? Are you going to be building and selling?

Area looks good, is it waterfront? I think lenders will most likely view this as commercial lending depending on how the above questions are answered. If you're seeking bank loans, you'll need to either achieve at least 100% debt cover (meaning, if the project costs you $20M, and you're borrowing $10M, you'll need to show at least $10M in pre-sales) if you're selling. Or else, potential rental income could be considered.

 

Purpose will be to sell them once built but may keep couple of them as rent is good

 

Then you might want to look at achieving pre-sales if you're taking it to one of the mainstream lenders. Some private lenders don't require pre-sales.

 

Are you building one after another?
Possibly could be done via resi depending on a few factors, certainly commercial loan otherwise.

Any benefit of just selling the blocks, let the buyers build there own houses, less hassle for you?

 

if they are all separate titles now and you will have 7 construction contracts you might be able to take it to 2-3 banks so that you might get it under resi. South Hedland might not be popular with one bank from a risk concentration point of view.
I’d be getting help from a broker to work out the best way to do this.

 

What does that mean:? 'having'?

Do you own these yet or will they be purchased?

 

From memory @Jess Peletier lived in 6722 before returning to the big smoke?

 

Its possible, may take a little longer timeframe wise though.

 

Yup.

Most lenders don't love South Hedland, and those that are okay with it will reduce the LVR in most instances.
You could look at taking them to different lenders - if you want to do it under resi, you'd likely have to do them in stages as lenders will be concerned about concentration risk. If you do it in a few stages and sell, unlikely to be an issue.

Will definitely be commercial lending if doing all at once.