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Residential Development Loan

Do you need a residential development loan so you can start work on your next big investment?

The last thing you want to do is run out of funds before construction is complete so setting up your loan in a way that supports your needs is crucial.

We can match you with a lender that will take a common sense approach to your plans to build a small to medium project like a duplex, triplex or a townhouse.

How do I get approved?

In order to get approved for a residential development loan, you need to put together an application that highlights your strengths as a borrower but also viability of the project itself.

How much can I borrow?

Small developments up to 4 dwellings

  • For 2 dwellings: Borrow up to 95% of the land and construction costs (hard costs).
  • For 4 dwellings: Borrow up to 80% of the land and construction costs (hard costs).
  • Borrow up to 100% of the market value of the property plus any costs associated with completing the purchase with the help of a guarantor.

Medium and large developments over 5 dwellings

  • Borrow up to 75% of the land and construction costs (hard costs).
  • Borrow between 65-70% of the GRV (gross realisation or on completion valuation).
  • Loan term: Up to 3 years.
  • Minimum loan size: $1,000,000.
  • Maximum loan size: Anything over $20 million considered on a case by case basis.
  • Residual stock loans are available to help maximise your return on investment.

Large projects such as multi-unit residential blocks, small office buildings and retail shops fall under commercial developments.

Choosing the right lender is critical!

We have strong relationships with the key decision makers at these lenders so please call us on 1300 889 743 or complete our free assessment form to find out if we can get you approved.

Do you need contingency funds?

Some banks require you to have contingency funds but some don’t!

We can help you find the right lender and negotiate higher Loan to Value Ratios (LVRs) and lower interest rates than you would normally be able to get if you were to go to your own bank.

We have a range of major banks and non-banks to choose from and understand how to build a strong residential development loan application.

Speak to us and get approved to first time around with a loan that will support you throughout the construction.

Is this a residential or commercial loan?

A residential development loan is for the purposes of building a maximum of 4 units on one title for residential purposes.

This could either be a duplex, triplex, townhouse or a small unit block.

Anything more than 4 units will need to be assessed by the commercial department of a lender and fall under commercial development loans.

With a residential development loan, your interest rates are a lot lower than getting a commercial loan.

How does the loan work?

Like a normal residential construction loan, the bank will release funds at the end of each stage of development.

These stages are typically as follows:

  • The deposit.
  • Base stage.
  • Frame stage.
  • Lock-up stage.
  • Fixing stage.

To receive each progress payment, it’s simply a matter of signing a progress payment request and sending it off to the bank along with an invoice from the builder.

For the first progress payment, you’ll have to provide a copy of the receipt from the builder showing that you’ve sent them the funds you’re required to contribute.

Getting progress payments can be delayed due to bank mistakes like losing your files but it helps if you have a specialist mortgage broker on your side who can manage all of this for you.

In this way, the progress payments can be smooth and you won’t be left in cashflow limbo with builders and tradesmen down your throat asking for payment.

How will the bank assess your development plans?

Think of a residential development loan application like pitching a business opportunity: the bank wants to know that the development you have planned is going to be viable and profitable.

Along with your personal financials, most lenders will also want to see a property development business plan or a feasibility study showing the costs of construction versus potential profit.

It should look really neat and professional because it shows that you’ve done your due diligence on the project.

What you’ll generally want to provide in a business plan is:

  • What funds you have to put towards completion (not including your security for finance).
  • Contingency funds in case things go wrong (some lenders like to see 10-20% in contingency funds if you’re an owner builder).
  • Your experience as a developer in the construction of similar-sized projects.
  • The experience of the building team (including their certifications).
  • A description of the site, its location and zoning.
  • A design concept.
  • The costs including landing, construction and soft costs.
  • Construction timeline.
  • How you plan to sell the properties or whether you have tenants lined up.

There are firms and companies that can help you draft a professional property development plan.

By doing so, you have a much stronger chance of getting approved.

Is this your first residential development?

Although you’ll generally need previous development experience in either a developer, builder or project manager capacity, one of our lenders may be able to help you if this is your first time.

  • You can borrow up to 70% of the Gross Realisation Value (GRV) or 80% of the hard costs.
  • Available for up to four dwellings up to $1,500,000.
  • Some lenders don’t need proof of income if you plan to sell the properties on completion.
  • No presales are required for small duplex, townhouse and unit developments.

Fill in our free assessment form to discover if we can get your approved!

Will the bank accept proposed rental income?


The lender will either ask for a letter from the real estate agent to confirm the market rent income or they’ll use the rental figure estimated by the bank valuer.

They can accept up to 80% of this projected rental income which can seriously increase your borrowing power.

Note: Rental income on vacant land will not be accepted but it may be accepted if there is a construction contract in place.

How will the bank look at my situation?

When applying for a residential development loan, the bank will want to know exactly what type of borrower they’re dealing with.

As a minimum, they want to see that you’re in a good financial position with good security, you have previous building or development experience in a similar-sized project and that you have a solid development plan in place.

Like other types of residential loans, you’ll generally need to provide your last two payslips, your last three months bank statements and your last 2 years group certificates.

This is to verify your income to work out your means of making residential development loan repayments.

As evidence of good character, you’ll need to have a clear credit file with major banks but one of our lenders may accept your application even if you have a bad credit history as long as you’re in an otherwise strong financial position.

Your security for the loan can either be cash or equity in an existing residential property.

If you need to refinance your current mortgage to access equity in your property, complete our free assessment form and let us know your plans.

Will I need to pre-sell the properties?

Unlike a commercial development loan, you don’t need to pre-sell any of the properties or units in the development in order to get approved for a loan.

There may be exceptions to this rule if you’re planning to build in an area outside of a metro or inner city or particularly in a rural location, which is seen as a higher risk.

Use the postcode location calculator to find out whether your development is in a high risk postcode.

Does the development cover soft costs?

Depending on your investment strategy, you may actually need two to three loans throughout the entire development process, specifically:

  • A “land loan” to cover the cost of buying the block of land.
  • The construction loan, to cover the building costs.
  • An investment loan if you’re planning to hold on to one of the properties.

What about the cost of the development application (DA) and other soft costs?

Soft costs are generally considered as costs that aren’t labor and materials. These “extra” development costs relate to:

  • DA approval from the local council
  • Clearing the block of land
  • Driveway and landscaping
  • Architects
  • Engineers
  • Legal fees

Many first-time residential property developers are often surprised that the development loan only covers the land and construction costs.

Make sure you take into account these extra costs when calculating the total cost of development.

The way around it is if you bought the block of land a few years ago and have paid off a good part of the land loan.

If you have the equity, you can cash out and use these funds to cover some of the extra costs.

We can help you refinance your existing mortgage to fund a residential development loan!

Alternatively, if you can provide formal written quotes for these soft costs we can often get the bank to extend the loan for these costs.

It really depends on the nature of the work and the lender that we’re working with as to whether this will be possible or not.

Call us on 1300 889 743 or complete our online assessment form and let us help you plan out your residential development loan so you can have a smooth construction process and get help with your development application (DA) if you need one.

Residential development loan FAQs

A residential development can potentially return higher dividends than simply investing in an existing residential property.

However, there is a lot more risk involved constructing a duplex or townhouse for investment purposes.

Apart from choosing the right location and researching the local market, sometimes things can go wrong with the construction process so you have to be prepared.

Where do I start?

Before even applying for a residential development loan, you should consider why you’re developing in the first place.

The most fundamental questions to consider is whether you plan to sell all of the properties, keep one to live in and rent it out or rent out all three as investment properties you will keep for a long time.

Answering this question should determine where you want to purchase and what kind of multi-dwelling property would best suit that location and market.

For example, you wouldn’t want to develop a triplex in a suburb with an over-supply of townhouses. Check the council for development plans before committing to purchase a block of land.

While you’re contacting the council, consider the zoning of the area you want to build and whether your property will be accepted.

This will give you some idea of whether your’ DA will be approved.

Who should I have on my team?

First and foremost, ensure the builder you’re working with is reputable and has experience in building residential properties of this size.

Choosing the wrong builder can result in work that isn’t to code and massive delays in construction that could cost you thousands.

That’s not to mention the fact that some builders are more than happy to take advantage of first-time property developers.

Other key people to have on your team include:

  • A solicitor.
  • An accountant (they can help in setting up ownership of the property, whether it’s in your name, a company or a trust).
  • An architect.
  • A surveyor.
  • A town planner.
  • An engineer.
  • A real estate agent (you should do your own due diligence on comparable sales but an agent can help).

What's your exit strategy?

Are you planning on keeping one of the properties?

Once the development is complete, you may decide that you want to hold on to one of the premises as an investment property.

If there is enough profit from selling the other one or two properties, you may be able to buy the property without the need for a home loan.

If there aren’t enough funds, your mortgage broker can help you refinance the property to an investment loan so you can pay out the development loan.

Also, check out the ‘Building and construction – residential premises’ page on the Australian Taxation Office (ATO) website for information regarding tax implications when selling a property in a multi-dwelling development.

For example, you’re liable for the Goods and Services Tax (GST) when selling one of your units and dwelling but you calculate the GST owed using the margin scheme and save on this tax cost.

You should seek tax advice from your accountant and financial advice from a financial professional to ensure you’re making an investment decision that works best for your financial situation.

Do you need a residential development loan?

Call us on 1300 889 743 or complete our free assessment form and we can let you know if you can get approved for a residential development loan!

  • Priya Karthick

    Myself and my husband want to develop a block of land in Victoria. my husband works full time and I’m self employed. I run family day care business at home. Last couple of years I was on maternity leave with my 2nd child and returned to work this year. I have tax returns from 2010 till now but my setback is I have figures for this year and couple of years back. Will the bank lend us money ?

  • Hi Priya,
    Yes we can help with this. There’s two ways we can approach it. With a development loan we don’t need to prove that you can afford it as the equity is sufficient for the bank OR the property being sold at the end will repay the debt.

    If you plan to keep the property then we can show that you were on leave and the old tax returns plus recent figures will prove you can afford the loan.

    As a last resort we can do a low doc loan and that would be fine. Due to recent competition they are quite cheap now.

    Best of luck! Call us on 1300 889 743 if you’d like our help

  • ORenard

    Will the bank release funds a little at a time just like a normal residential construction loan?

  • Yes, the bank will release funds at the end of each stage of development, mainly – the deposit stage, the base stage, the frame stage, the lock-up stage and the fixing stage. In order to receive each progress payments, it is simply a matter of signing a progress payment request and sending it off to the bank along with an invoice from the builder.

  • Adam

    How does a bank assess your serviceability to borrow for a residential development? If I purchase a property with the maximum amount I can borrow, do they assess the development loan based on the final valuation of the development or on my income/equity? Also do they take into consideration the future rental income generated by the new properties?

  • Hi Adam,

    It’s a tough question to answer as it really depends on the size of the development and your intentions after it’s complete.

    Small Developments (<4 units)
    – Assess on a cost basis. Will ignore the on completion value being higher.
    – Assess ability to make repayments and afford the loan on completion using your income and rent income.

    Medium Developments (4 – 20 units)
    – Assess cost and on completion value with LVR limits for each
    – Assume interest in capitalised during construction and repayment is made from the sale of the units.
    – A resume, cashflow projection, business plan and marketing plan are required.

    Large Developments (20 units and above)
    – Assess cost and on completion value with LVR limits for each.
    – Assume interest in capitalised during construction and repayment is made from the sale of the units.
    – A resume cashflow projection, business plan and marketing plan are required.
    – All terms are negotiable depending on the market and the lender's appetite.

    How many units are you building?
    Can you afford to keep them at the end based on the likely rent income and your income?
    How much is the property worth now, how much do you owe and what is the cost of construction?

  • Zackary

    Developer has completed a 10 townhouse development but with only 2 pre-sales. Market value of remaining units are close to $1.2 mil on average and totals around $10 mil. I was told by my lender to sell remaining stock or refinance. Need help!

  • Hey Zackary, we have a lender in mind that may be able to help, however, note that it’s likely that your LVR will be limited to 70% considering the large loan amount. You may be required to meet some additional criteria so please call 1300 889 743 to discuss all this clearly with an expert mortgage broker.

  • GG

    Hi, I want to borrow $3 mils to finance construction of 5 townhouses (residential). I’m self-employed and can provide accountant’s letter. How much can I borrow?

  • Hi GG,

    One of our lenders can approve a loan based on a 65% completion LVR and a maximum of 80% of the total development costs. However, there may be a pre-sales requirement and you’ll also need to provide an income declaration along with the accountant’s letter. Please call 1300 889 743 to speak with one of us about this.

  • alberto


    I have over 10 years in Project Management experience in delivering mid to high rise apartments in Melbourne. I now wish to start my own development project. I have a house and an investment properties valued at around $2.2 Million and a combined loan of $900K. Plenty of equity. I have been self employed for the last 9 year running my own company limiting my wage to the minimum. I am after a Development Loan to purchase land and to construct 2 town houses to re-sell. Will a bank or a financial institute lend me money?

  • Hi Alberto,
    Yes we can help with this. Your equity position and experience is what would make it a deal. Also if you’re working on other jobs then you’ve got a stable income as well which gives comfort to the bank.
    This is a complex scenario so please contact us here
    Once you’ve given your broker all of the supporting docs then please ask them to discuss this with Otto in our office to find the best possible solution.

  • Malex

    I have been approached by a property developer to purchase my home as it has the potential for a four unit development. However if there is money to be made, I would rather it go to me instead of to the developer. My question is – would I get finance from a lender. I have a mortgage on the property and I also have an investment property, both are valued at approximately $1,300,000. Combined mortgage of $740,000. Approximate equity $560,000. I work full time in a secure government job and earn approximately $90,000. I estimate I would need to borrow approximately $1,000,000.

  • Hi Malex,
    It’s unlikely that you could qualify to build this yourself, but it’s not a definite no.
    I’d strongly recommend that you don’t do it yourself as developing a property is a highly technical and risky venture. Experienced developers go bankrupt quite often due to unforeseen events or bad timing. It’s best that you do a few small renovations, then a duplex and then consider a larger development.
    If you would like to do it yourself then best to wait a few years until you have more equity and also to get a professional to manage the project for you.

  • Marty Cage

    Hi, I would like to develop my mothers deceased estate, to put 2 duplexes on it, I have equity of about $200k and so does my brother. The build is approx $800k. Should be able to sell each for around $1.5m. Would we qualify for a development loan?

  • H Marty,
    Just to clarify are you looking to build 2 duplexes i.e. 4 dwellings or a single duplex meaning 2 dwellings?
    And currently how much is the property valued at and how much is owing on the property?
    Do you have experience in construction or development?

  • Marty Cage

    Sorry, just to clarify, 1 duplex, rough estimate build cost after demolition of existing house is $800k.

  • Hi Marty
    Yes we can help with this. With some of our lenders we can get this to be a standard construction loan if you’re both working. This means that the cost of the loan is greatly reduced however you need to make repayments during construction whereas with a development loan you don’t have to make payments but it is much more expensive.
    If you sell the property within the first 18 months then lenders may charge us a fee for introducing an unprofitable loan. In most cases this is 0.77% of the loan amount in the first year and half that in the next 6 months. We would pass this fee on to you however it would still be much cheaper than a normal development loan. If you’d like our help then contact us here