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Funding for owner builder house construction
The Challenge
Our client was able to secure a sale on a house and land package. The end buyer was a Self Managed Super Fund so could not enter into a traditional house construction contract. Our borrower was able to secure the sale of the property prior to construction for full end value amount by providing a fully built product. The borrower did not want to take capital from his building company so approached us to provide funding.
Our Strategy
Carefully review enforceability of the pre-sale contract with written confirmation from the lawyer that 10% deposit would not be released to any party without our consent
Ensure loan limit included full interest prepayment to ensure LVR was preserved
Borrower has strong track record of delivering houses as well as much larger projects
Borrower well known to FHW
We managed all progress draws
If pre-sale contract fell through for whatever reason, we would have reduced the loan with the deposit and resold the property
The Outcome
Borrower secured sale and locked in project profitability
Due to higher LVR we were able to secure a higher return for investors
What made it a good credit risk?
Strong borrower with proven record in property development
Strong Asset position of the borrower
10% pre-sale
Desirability and price point of the property
As Is' Valuation
$856,000
(based on unconditional pre-sale contract)
Loan
$728,000
LVR
85%
Target Investor IRR
12%
Location
North Brisbane
