When approaching a lending institution being a Bank or otherwise, it’s vital to be prepared with quality information and knowledge about the site and the project you intend to build. Whilst perhaps stating the obvious it’s amazing how often over the years at Finance Advocates Australia, that we have been approached by clients advising that have purchased a site without any idea of the core basics of the development.
I refer to such things as the profit margin on the job, the potential gross realisation of the project, the saleability of the actual property and is it the most suitable for the area, cost of construction and other costs such as selling agents fees and the most often forgotten GST. Too often sites are purchased without regard to the land cost because emotion gets in the way of good business sense.
Of course good preparation and thorough knowledge of what you intend to build and sell if that’s the case, makes the job of the lender in approving the finance all so much easier.
How to choose the right Development Finance Lender?
It’s important to understand that various Bank and Lenders whilst all offering Development Finance do have in some cases vastly different lending policies. Banks for example will lend anywhere between 70% to 80% of the development cost of the project (and even the cost definition various from Bank to Bank) provided in most cases that does not exceed 65% of the projects end value.
The other vastly different adoption of lending policy is the level of pre-sales / debt coverage required. Finance Advocates Australia has arranged Bank loan funding where there has been no pre-sales however the majority of the Banks will generally require a minimum of 75% debt coverage with one major bank wanting 100% debt coverage net of agents commissions and GST.
Gross Realisation Lenders or End Value Funders take a totally different approach on the other hand. Whilst they still adopt funding on a cost to complete basis like the banks, the development loan amount is generally based on the end value of the project net of GST (in most instances its 66% on a First Mortgage Basis). This sees the borrower being able to borrow more money than a cost based funding option like the banks. Pre-Sale levels are much more flexible as well with several offering no-presales required up to certain borrowing amount generally $5m.
Using an experienced development finance partner such as Finance Advocates Australia which has funded over $1b in development deals in its 30 years’ experience, can help identify the most appropriate development loan lender for your next project and ensure the lender say “Yes” to your development finance request.
About Renato Sturma:
Renato Sturma is the leading Development Loan Specialist Consultant. He brings to the business a wealth of knowledge accumulated over 30 years working amongst developers, banking and financial institutions.
His expertise is unparalleled with an acute understanding of financial products and a thorough working knowledge of the intricacies associated with property development.
Renato is passionate about working with developers to secure finance in situations where finance may have otherwise been unsuccessful with traditional lenders.
He is driven by the challenge of finding a solution that others may not have been able to achieve.
A commitment to knowledge, excellence and service cements Renato’s position as one of Melbourne’s most highly sought after property development funding consultants.
Finance Advocates Australia is a development finance specialist assisting clients with this process, and not only guides developers large and small with their development finance application but also provides a guiding path with information required and feasibility reviews.
Fill out the form below to learn more about Finance Advocates and what solutions they can provide: