Commercial or Residential Loan Development Project

[ash007]

Hello All

I have a residential property that I now know is zoned for Terrace and Apartment building. I have been to an architect and he has showed me that I can build 6 terrace houses 3 levels each with single garage, 3 bedrooms, 2 bathrooms and each would generate 600 rental income per week. I approached a loan broker and he explained that building more that 2 properties on a site is considered a commercial loan and therefore the loan term is 15 years max.

He explained that I will need to pay it off in 15 years. Is this correct? If so then I cant afford to build this I guess. I can pay $2500 every fortnight against the loan but this according to him will mean I can pay it off just on time. Which will be very tight and said is there anybody that can support me if I fall behind in loan. I dont think I can rely on anybody to back me up. Is there anyway I can have a longer term? Should I build 3 houses and move the current one to front or back of the site so that I can build another 3 in future and get rid of the old one.

I need some really guidance here please as I dont believe I will have this opportunity again in my lifetime and therefore dont want to mess this up. Your feedback will be appreciated. thanks.

[sidinz]

Have you considered a Joint Venture? This is where you team up with someone who can finance the project, then later you split the profits (how you agree, doesn't need to be 50:50).

[DaveW]

The loan manager is correct but you should talk to more, gather as much info as possible. This project you will need a good relationship with your loan manager because you will not be drawing down on the entire loan only as you need to buy materials and pay labour etc. This flexibility will save you in payments until it is near completion by that time you may already have a buyer or tenant.
You may consider selling 1 or 2 of them so that your others are more paying for themselves.
Build just 2 to start with like a duplex. Live in one and the other is a rental - this might not be classed as commercial. This comes back to choosing a loan manager that works in your interests.
It's hard to comment on the old existing property without knowing more.
Let us know how you go.