Hi everyone, Long time lurker, first time poster. This ones for the experts… We’re doing our initial feasibility on a small townhouse development and we’re trying to work out what level of capital is required before moving forward. We’ve managed to get a good sense of all the costs involved after talking to a few experts, but are stumbling on how valuations work from a finance point of view. Some brokers and lenders I talk to mention that the valuation will be done on a cost basis: ‘land value + build contract’ method, and the loan amount set at 80% of this. This happens to be quite a low loan amount. My understanding is that this is the same as H&L package we bought years ago. My two local bank mentioned it worked like this (NAB). Others have mentioned something along the lines of an ‘in one line’ valuation – which works out much better. Better still, one broker mentioned ‘end value’, but my reading is that this is for commercial deals. As a guide our ballpark costings are around: · Land: $500k (+ stamp duty) · Build Contract: $600k · Other: $300k (acquisition costs, project management, site costs, DA costs, interest, etc). · Total cost: $1.4mill · Total estimated end value: $1.7mill Assuming the land value is $500k, the total loan amount amount ends up being 80% of (600+500k) = $880k. That means we need to contribute a $520k as a minimum to the deal. The ‘in one line’ method the loan amount is around a loan amount of around $1.15m (assuming a 15% shading of the end value). This reduces our contribution required to about $250k. On an end value basis – our contribution is lower still, with a $1.36m loan amount at an 80% LVR and a $40k contribution. We have the funds in all scenarios, but want a clearer picture of the breakdown of what proportion of the total project cost can be 'funded by the banks vs funded by us'. Do different lenders lend differently on this? Are there some better than others?