Comparing the best course of action when it comes to a construction loan can mean various angles. The number of houses you should build can be compared with a simple approach if we stick to some realism.
Compare the cost benefit
Two aspects to this, the end cashflow and the increase in value.
Examples of costs can include, building, council contributions, ground works etc, however the starting point should be the current value of the property. Not what you had paid to obtain the property many years ago. This is important for the new development to be compared against what you could realise without building.
Of recent times accounting for cost overruns is important.
Staged Consents
If the numbers work but you struggle to get full funding for the whole project, you can look at staging the consent. This will mean that you can get titles without having all the houses completed.
This could also mean more options if the costs or the terms of your funding change. As you may be able to sell a house or two to enable the finish line.
Hamish Firth Explains “You might lodge a six-unit consent to be built and consented and subdivided in two stages. So it’ll have a series of conditions which allow for three titles to come out, leaving you a parent title or a title at the end where you could do further three units.”
“Now there’s gonna be some additional upfront costs with regards to your consenting. And I would suggest that instead of having to rip a driveway up you’d put all the services in for all six while doing the first three”
Best in the business
Hamish Firth from Mt Hobson Group shared his knowledge on this clip. He is the expert when it comes to obtaining a resource consent.
