Finance Broker for Townhouse Development

Can anyone recommend a good finance broker to talk to regarding getting some funding against a 12 x 4 bedroom townhouse development near Penrith? We are looking to borrow $1.5-2.0m (lvr on cost would be about 40%), interest paid at maturity (say 15 months), secured by first mortgage over the land (no other debt on the project), but without requiring ANY pre-sales. DA is issued and CC is due this week with construction starting immediately thereafter.

 

Commercial Finance or Private Lending most likely avenue to fund it.
If securing by the land only what is the land value? Do you own the land already?
Have you done a similar development previously to show you have experience?
Plenty of good brokers on this forum

 

Land is approx $1.9m. The build is $3.0m. Yes we have done similar projects with this and other builders.

 

That will help your case, typically lenders want to see you have had successful experience with projects of this size/nature.
I'm assuming you didn't have to get finance for the past projects you completed, is that correct?

 

We have used NAB on previous deals; they will structure it as if we are going to hold and rent if there are no pre-sales. I wanted to investigate the availability and flexibility of private lending. If it isn't flexible enough for the extra cost I will go back and deal with NAB - who have been good to us previously (when the off the plan market was in existence).

 

Funding market for this type of project has changed a bit in recent years - with smaller more flexible lenders coming in and offering decent products to bridge the flexibility/ease gap that developers are often looking for. Also given its commercial lending, lenders react to general market sentiment a bit more and tailor decision making accordingly (e.g. harder to fund developments with majors in 17/18 given market dynamics).

You're ticking a lot of boxes here to be able to get funding:
- Loan size helps here - could avoid need for pre-sales by keeping loan size <2mill and still obtain favourable terms.
- LVR helps and is do-able

Re loan amount:
Lenders typically will base loan drawdowns on funding the build.
I.e. they'll fund 100% of the build contract to the builder and control the payments to them as they complete each stage and order vals/QS reports as appropraite, release remaining left over $X amount at land refi settlement.

Without pre-sales, will likely need to demonstrate affordability if you want decent funders.

The private guys are very flexible on this though, so its not so much of an issue if you can demonstrate a decent exit strategy like a refinance/plan to sell to risk mitigate (loan terms are short, need to be repaid, no pre-sales means no actual evidence of loan repayment strategy). A few will take the rental income income into consideration (even on commercial products), which will assist, but will look into your full situation to determine serviceability. Assuming its a company non NCCP loan of course (often one of their pre-reqs).

We've done a handful of these in 2019 with Latrobe, pretty good product for this space and relatively affordable compared to private lenders who do it at lower LVR and typically higher fees. Expect, ~8% rates, ~1.5-2.5% app fees. Can get interest capitalised, loaded into loan amount. Have used private too - but try to avoid when possible. Private guys scale - usually creeps into high 9s/early double digits - but they can issue funding quickly and a bit more seamlessly. Careful who you go to too, some stories of sneaky operators out there.

 

Pre-sales isn't a requirement pre se - it comes to serviceability.

Your serviceability will determine if you need x presales or no presales.

Next thing is which lender is going to accept your income type, etc. Do you need full doc lending or lo doc lending, etc. Don't go down the private lending path as its extremely expensive and it will seriously eat into your margins.

Get in touch with a broker or banker that has done this a bunch of times rather than one talks theoretics. Really important to get the basics (profit margins, etc) right for submission

Redom sounds like he does them so get in touch with him and he is also based in Sydney.