Development finance fails in the middle. The land settles, the build starts and somewhere between the frame stage and lock-up the money runs out because the exit was never priced. We set the funding stages by working backwards from how the project ends.
We arrange development funding for residential projects from a first dual occupancy to multi-lot subdivisions and rooming house construction. Our commercial credit team runs the deals.
Who this is for
- First-time developers doing a dual occupancy
- Small subdivisions
- Experienced developers
- Builders funding their own projects
- Rooming house construction
Who it is not for
- Projects with no feasibility, no equity in or no exit plan
- Anyone whose ATO tax portals are not clear across every individual and entity
What lenders look at
A development lender is underwriting a project, not a property. The security does not exist yet. Everything on this list is a way of judging whether it will.
- Feasibility. Costs, revenue and margin, set out in a form the lender can test
- Gross realisation value, generally assessed less GST
- Fixed-price contract and builder strength. Who is building it and whether the price can move
- Contingency. What happens when something costs more than planned
- Pre-sales, where the project needs them
- Equity in. Your own money in the project before the lender's
- Exit plan. Sell, refinance or hold, and the numbers for each
- Clear ATO tax portals for every individual and entity behind the project
Loan size and timing
Development lending typically runs at 65% to 80% of total cost, and is often capped near 60% to 65% of gross realisation value less GST. Both limits apply at once, so the lower one decides the facility. The gap is your equity, and it has to be in before construction starts.
Once your documents are back, the strategy lands within 7 business days. From there the funding runs in three stages: the land, construction drawdowns against progress claims and the exit, which is either a sale or a refinance onto a standard facility. We set all three at the start so the build never stalls waiting for money.
Before anything else: Clear ATO tax portals across every individual and entity involved. Lenders check this early, so we check it first.
The mistake we see most
No exit plan before the land settles. The feasibility says the project works, the land is bought and only then does anyone ask what happens at the end. If the answer is refinance, the serviceability for that refinance has to exist at completion. If it is sell, the pre-sales and the market have to support it. Planning the exit first changes what you buy and how you fund it. Episode 85 and the development finance article go through it.
A real example
A client took a property bought for around $740,000 and, through a trust structure, a budget renovation, a build on the back block and a deliberate valuation strategy, lifted the position to around $1.6 million. The sequence was funded in stages, with each stage's exit known before it started. Dion walks through the full case in episode 80, and a dual-dwelling value-add that ran from $740,000 to $1.7 million is in episode 87. Identities are not disclosed.
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How we work
Development deals run through our commercial credit team. The steps are the same as every Stratega engagement; the strategy stage carries more weight.
- 15-minute fit callWith our team. We learn the site, the project and your equity position, and whether it is fundable. If it is, we book you a Discovery Call with Dion.
- Discovery Call with DionA free 30-minute conversation about where you are, where you want to get to and what has to be true first. If we can help, we say how. If we cannot, we say that too.
- Finance StrategyThe written funding plan, within 7 business days of your documents coming back: land facility, construction facility and drawdown schedule, contingency, the exit and what has to be true at completion for the exit to work.
- ImplementationWe lodge the land and construction facilities, manage progress claims with the lender through the build and arrange the exit when the project completes.
Access to a wide panel of major banks, non-banks and specialist lenders through Connective, plus off-panel lenders where the deal needs it.
What it costs
The fit call and the Discovery Call cost nothing. A development Finance Strategy is a one-off fee for designing the full funding plan across land, construction and exit. We quote it on the Discovery Call, once we know the project. If the strategy does not leave you knowing exactly where you stand and exactly what to do next, the fee is refunded in full.
Common questions
How much of the project will a lender fund?
Typically 65% to 80% of cost, often capped near 60% to 65% of gross realisation value less GST. Whichever limit is lower sets the facility, and the rest is your equity, in before construction starts.
Do I need pre-sales?
It depends on the project and the lender. Small projects with a strong exit often do not. Larger projects, or ones where the exit is a sale, usually do. We work out which before you commit to a site.
Can I refinance at the end instead of selling?
Yes, if the serviceability exists at completion to carry the completed project on a standard facility. That has to be tested at the start, not at the end, because it changes how much you can borrow and which lender you build with.
What if the build costs more than planned?
That is what contingency is for, and lenders expect to see it in the feasibility. A fixed-price contract with a strong builder narrows the risk. The funding plan includes what happens if the contingency is used.