10. Have your documentation complete and in order
It’s no secret what the lender’s going to ask for, so have it ready. Not having the information gathered and ready to go is just wasting time. At a minimum, you should have:
Address of the site
Feasibility
Copy of the sponsors driver’s license
Name, address and ACN of the borrowing entity (e.g. the development company or special purpose vehicle)
Assets & liabilities statement
Evidence of any presales
Plan for exiting the loan (e.g. sale of the units, refinancing)
Copy of any valuation that’s been done
9. Bring experience onto the development team
If you haven’t done a development before, have someone on the team - preferably an experienced construction manager - who has
8. Have a strong builder
Builders are key. You need to have one who is established and reputable, and you need to have a fixed price building contract.
7. Have a high profit
Projects with high profit are sexy, and ones with a low profit are unlikely to be considered in this environment. Do whatever you can to increase your profit margin, and don’t pursue projects with low profits.
6. Location, location, location
This is hard to control, but if you don’t have a project in a good location, in the middle of a pandemic is not the time to try and make that work. If you have the choice, focus on sites that are strong.
5. Presales
Nobody likes the discount that comes with Presales, and Lord knows they’re hard to get at the moment, but the fact is they make the difference in a lot of deals. Most of the deals I see right now cannot be done without Presales.
4. Low LVR
Lenders love a low loan to value ratio.
3. Have your risks mitigated
Make sure you’ve done your homework, you’ve looked at your product realistically, and you know how you’re going to handle the various risks that may arise.
2. Show a strong balance sheet
Lenders need to see financial strength in their borrowers. If you don’t have a strong balance sheet, it’s worth considering bringing in a partner with a stronger A&L.
1. Have a strong exit
Everybody wants to know how they’re going to get their money back. Presales are good, strong marketing programs are good, indications from interested parties are good. Find a way to show that your project is going to sell.