Browse Forums Home Finance 1 Jul 30, 2010 6:41 pm I am not sure if this is the right place for this topic, but i have scanned through the sections of this forum and found this is the most relevant one. please tell me if i should post this somewhere else. the background information is this: me and my partners started a company and purchased two lots of land (with planning permit) next to each other with very old house on top. 80% of the sale price is from the bank through business residential loan. now we are going to build multi-townhouses on the land, but we are confused about how much we can actually finance from the bank for construction. we have a preliminary building contract (unsigned) but no pre-sale. my questions are 1: What is the maximum LVR we can get from the bank for construction and which bank do you recommend for this kind of development? 2: if we want to HOLD SOME of the townhouses after completion of building and rent them out, will it affect the amount of construction loan we get? 3: Is it better to get loan from the same bank you get your residential loan than other bank? if you need any additional information to answer these questions, please let me know. Thanks Re: Developing Loan Questions 2Jul 30, 2010 7:16 pm Hi, hope this helps. 1: What is the maximum LVR we can get from the bank for construction and which bank do you recommend for this kind of development? If you are building more than 3 units on the site then the development is deemed commercial and the Bank will only extend 70% against the land and 70% against the construction. If three or less than may do up to 80% depending on whether these are high end properties. 2: if we want to HOLD SOME of the townhouses after completion of building and rent them out, will it affect the amount of construction loan we get? This would not effect the amount of loan you want but it will depend if you generate sufficient income to be able to service your loan. Usually the Bank would seek no less than say 1.5 times interest cover. 3: Is it better to get loan from the same bank you get your residential loan than other bank? It's always good to get the loan from where you have history, however other Banks may have this appetite but there are many more things to consider other than these points above. - Are you owner building or engaging fixed price contract - If the construction costs exceed $2M then you may need to engage a quantity surveyor - Sunset clauses - If you presell then are these arms length, 10% cash deposits held etc. - Can you meet cost overruns on the project. - How long do you anticipate planning permit to be issued - Will you have any objections to the build - What margin do you expect to make on the project. Re: Developing Loan Questions 3Jul 30, 2010 8:21 pm nunzio Hi, hope this helps. 1: What is the maximum LVR we can get from the bank for construction and which bank do you recommend for this kind of development? If you are building more than 3 units on the site then the development is deemed commercial and the Bank will only extend 70% against the land and 70% against the construction. If three or less than may do up to 80% depending on whether these are high end properties. 2: if we want to HOLD SOME of the townhouses after completion of building and rent them out, will it affect the amount of construction loan we get? This would not effect the amount of loan you want but it will depend if you generate sufficient income to be able to service your loan. Usually the Bank would seek no less than say 1.5 times interest cover. 3: Is it better to get loan from the same bank you get your residential loan than other bank? It's always good to get the loan from where you have history, however other Banks may have this appetite but there are many more things to consider other than these points above. - Are you owner building or engaging fixed price contract - If the construction costs exceed $2M then you may need to engage a quantity surveyor - Sunset clauses - If you presell then are these arms length, 10% cash deposits held etc. - Can you meet cost overruns on the project. - How long do you anticipate planning permit to be issued - Will you have any objections to the build - What margin do you expect to make on the project. your reply helps 1. we are building more than 3 units. if we have borrowed 80% of land cost, does it mean we can only borrow 60% of the construction cost? (assuming the residential loan and construction load can not exceed 70% of the total cost--land purchase and building cost) 2. if we sell SOME units and re-pay ALL construction loan within 3 months of completion, there will be no requirements on our income, right? how much is the discharge fee usually? 3. engaging in a fixed price contract 4.construction cost is below 2M, so i guess we do not need a quantity surveyor (what is this anyway? ) 5. what is sunset clauses? 6. you mean if the bank only lend us 60% of construction cost, are we able to get the rest ? If thats what you mean, the answer is yes. 7. we already have the planning permit. basically everything is ready. 8. i do not understand this question 9. 25k after tax btw, anyone knows if we have to pay GST when we sell the units? thanks very much Re: Developing Loan Questions 4Jul 31, 2010 8:33 pm Finance for developments is such a complex area and the answers vary depending on so many different factors that it would be impossible to give accurate responses via this forum. The location, your experience, asset position, if you can service the peak debt, if the blocks are two separate developments or one etc all come into it. Contact a commercial mortgage broker who can then sort this all out for you. I'm not an expert in this field however if you would like me to recommend someone to you then pm me. Thanks Always handy to have the facts on hand when relying on agents advice, a lot of times sale agents advice is only good anecdotally, and when you actually dive deeper it's… 33 52770 The biggest challenge will be if you take out a loan and then run out of money - you'll have an incomplete security and lenders do not like this so you can get stuck.… 2 19114 Hi, you've probably already resolved this, however, Commbank will probably pay the funds to you after you send evidence the work is done regardless the change in the quotes. 1 35331 |