Finance for small scale development

Discussion in 'Loans & Mortgage Brokers' started by Rooky, 23rd Oct, 2019.

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  1. Rooky

    Rooky Well-Known Member

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    For small scale development i.e. upto 3 townhouses, if you own the land outright without any mortgage, is it possible to get construction finance without any serviceability and also keeping risk limited to project only? I guess total LVR will be appx 50% of end product market value. Is pre-sale is required for construction finance in this scenario?
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    not under resi
     
  3. Rooky

    Rooky Well-Known Member

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    Thanks @Terry_w .

    For commercial finance, i guess presales to cover finance amount is must ? Or at 50% LVR, its not required ?
     
  4. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    No. But it helps but does not guarantee any sale. I have seen lenders disregard sale contracts. Anyone can default.

    LVR is just one element. Repaying ths loan is what lenders seek. And short loans are NOT desired by banks. Try applying for 12 month finance. Lenders dont want it at any rate or fee.
     
  5. Morgs

    Morgs Well-Known Member Business Member

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    You might get a private lender that'll do it at 50% LVR. Won't be cheap though!
     
  6. Richard Taylor

    Richard Taylor Well-Known Member

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    What name is the Title in?

    If the loan term is over 62 days you will need income to show servicing even with Private Funding as it is a Coded loan.

    Company name is totally different.

    Cheers


    Richard
     
  7. Redom

    Redom Mortgage Broker Business Member

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    Can probably go a couple different ways:
    - If in company name, there'll be 'no servicing' private funding options.
    - If personal, will need to presell to help servicing requirement (this alone may not be enough though, as they'll still review you, but the additional project won't hurt your serviceability further).

    Note for private options, the price won't be cheap, usually close to double digit rates & a few percentage points in app/risk fees. There's quite a few private lenders that play in this space.

    If in a personal name, you may be able to get away with it if you pre-sell enough to ensure zero end debt. This will probably be a cheaper way to access finance, but you'd need to do your feaso to see if the OTP price will lower profit projections further than the additional funding cost of private. Will also need to see if you have access to this too.
     

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