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Development/residential finance

Discussion in 'Property Finance' started by benofbrisbane, 21st Aug, 2016.

  1. benofbrisbane

    benofbrisbane Member

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    Hi All

    I have a 607 sqm corner block with a house on it in Brisbane in the suburb of Fairfield (flood free part :)).

    I am hopeful of getting DA approval next month to retain the existing house and build three new townhouses at the rear of the house.

    I have been told that the loan will need to be a commercial loan as I am constructing more than two.

    I had understood that at least some bank regarded four or less as residential and would lend on that basis.

    I am just wondering whether anyone knows of a bank which would issue a residential loan for construction purposes? I am happy to use a broker if there are any that think they can get it over the line on a resi deal.

    Thanks for your time.

    Cheers

    Ben
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes. There are a few threads on here already about this.

    St g. Rams aretwo
     
  3. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Depends on the DA.

    If the DA is to subdivide the house and then construct then you are looking at the following lenders:

    1. NAB (80% LVR)
    2. Heritage (80% LVR)
    3. Bankwest (80% LVR)
    4. RAMS (80% LVR)
    5. St George (depends on the strength of the application but most likely 70% LVR)

    If your DA is construction and then subdivision then it becomes 4 dwellings on a single title so your lender choice is limited to:

    1. Bankwest
    2. Heritage
    3. RAMS
    4. St George (depends on the strength of the application but most likely 70% LVR)

    Out of all the lender RAMS has the superior product when it comes to 4 units on a single title.
     
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  4. Daniel007

    Daniel007 Well-Known Member

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    Would they consider the potential rental income from the townhouses in the serviceability calculations?
     
  5. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Fo shizzle my nizzle.
     
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  6. albanga

    albanga Well-Known Member

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    Your keeping the existing house and putting 3 behind it on 600sq. What are they going to be, 1 bedroom with a combined kitchen/bathroom?
     
  7. klabat

    klabat Well-Known Member

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    Would be interested in the address and the zoning its in for this to be approved. You may just get a refusal... at least your looking into the finance part. Hardest hurdle is to get the DA approved.
     
  8. benofbrisbane

    benofbrisbane Member

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    Thanks Terry and Shahin.

    It is construction and then subdivision.

    I have used St George before but they were hopeless.

    I will have a look at Rams.

    In relation to the other questions, the townhouses will be 3 bed, 2.5 bath and 1 car. I have received the RFI and BCC appear to be on board.

    I note that they recently approved 5 three bed townhouses on a 607 block.
     
  9. wombat777

    wombat777 Well-Known Member Premium Member

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    Are there any of the residential lenders that will finance construction of 5 dwellings or 6 dwellings at 80% lend? ( to avoid commercial finance and the much lower LVRs associated )

    I have a small site. 4 dwellings could be done, however I think profitability, end-value and cashflow would be maximised doing small dwellings ( 1 and 2-bedders ) and these would better suit the location.

    I'm looking at gross floor area in the 350 sqm to 400 sqm range excluding parking ( irrespective of number of dwellings ).
     
  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Frequently asked here. Search for posts br Shahin
     
  11. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    RAMS might do 5 by exception - not 6 though, that will definitely be commercial. For 5, RAM's will want to see ideally that you'll be holding them all, and are not a 'developer' - as in you don't do this stuff for your income/job. Are you planning to hold them? They'll definitely prefer it if you're not selling the whole development.
     
  12. wombat777

    wombat777 Well-Known Member Premium Member

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    Current plan is hold them all for 1 to 2 years and then sell 1 or 2 after say 12 months ( to pay down PPOR debt and retain some cash for further development ). Would retain the others as the area will be good for growth/cashflow.
     
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  13. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    It would definitely be worth a shot then. What's your servicing like?
     
  14. wombat777

    wombat777 Well-Known Member Premium Member

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    Will primarily need to rely on the rental income from the development ( using only 80% of the rental income @ 7.25% ).

    Intent is to optimise the configuration of units to achieve an appropriate level of cashflow. Should hopefully be doable due to the location ( 2-3 minute walk from train station ).

    Not looking to start for 18-24 months. Trying to get an achievable plan in place and ducks in a row. Largely have the cash/shares to fund the deposit but still need to save some more.

    ( @Terry_w, yes aware it has been asked but the lending landscape is constantly changing )
     
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