Using future rent for serviceability of developments

Hello All

I'm looking for information on how lenders consider future rental income to cover the serviceability of construction loans (capitalised interest) for developments?

Obviously rent won't be able to cover a very large loan, but could someone give me a rough idea of loan size = total rent * some factor, taking into account any rent shading.

Thanks in advanced

 

Depends on what kind of development this is for, townhouse, apartment block etc?
The loan size will be determined by the applicants overall financial position not just rent * X

 

Hi Lidsay.

Thanks, I thought there would be some rough multiple as a starting point.

Let's say it is a $5m end value apartment development, rental yield is 5%. developers are providing land and cash equal to 50% of end value.

Would anyone lend the 50% shortfall based on those end rents?

Thanks.

 

Hi Rolf, thanks. I understand most developments would use presales to cover lending of the development, because end rents would never cover the full amount and they intention is to to exit quickly.
But end rents must be able to support some serviceability, even though heavily discounted. Would anyone lend $2.5m on estimated $250k end rents? With a developer contributing $2.5m themselves.