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Justin G.
Justin G.
Mascot, NSW
22 Likes
2 Followers

Hi , trying to get an idea of what the going interest rate & max LVR is for Residential property developments circa $10-20m?

7 years ago

Responses

Hi Justin,

This would be treated as a commercial transaction so you'd be paying commercial interest rates, which would depend upon the overall risk profile of the transaction, but could range anywhere from 5% - 7%.

Different financiers will have different measures, but we work on a maximum 75% LDCR (loan to development cost ratio) & 65% LVR (loan to valuation ratio).

Only other tip I'd give at this stage is if you will be securing pre-sales, ensure that the deposit is 10%, otherwise anything lower could be considered unqualified/may not be taken into account by the lender as the source of clearance.

Hope this helps........

Comments

Thanks Phil , much appreciated!

I am assuming that the 10% pre-sales deposit will need to be held in a trust account rather than being used as equity in the project?

Correct Justin - the deposit would be held by the R/Est agent, just like a deposit on any normal purchase.

Probably also worthwhile getting your ducks in a row in terms of:-

1) Experience. It's towards the top of the list; and/or
2) Who will Project Manage. It's quite likely that the Bank will want a QS that is on their panel/they approve plus a Project Manager.
3) Experience/background of the builder/key contractors. The banks will want to know that they are capable.
4) Lump sum contract with a contingency built in.
5) What other income, outside of the sale of the properties (if that's the intent) is available to service the debt, as this will drive the required level of pre-sales. If the debt is to clear from the sale of the completed properties & there is no other income, aim to cover most or all of it covered from pre-sales.

Good luck.......

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