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Spec Build Development Finance

April 10th, 2015.

At KPM we have a number of clients who are regularly involved in Spec Build projects, from 1 to multiple houses at a time where the client does not wish to market the houses for sale until they are near completion, thereby maximising the end value / price paid given the purchasers can “touch and feel” the product.
Often the traditional Bank lenders are reluctant to assist with finance for these projects and require pre-sales to be in place before committing to fund the project presenting the classic “Catch 22” between the client ideal / business model and the Banks risk appetite.

Our KPM Specialist Lending division specialises in this area and we have relationships with many Non -Bank lenders in this market as well as the Banks. The critical issue here is the value proposition i.e. maximising sale price versus balancing the financing costs which naturally eat into the project margin. Non-Bank lenders are not always as expensive as they have been historically and a recent 4 house Spec Build project was financed to the amount of $1.5m in Auckland with an all up fee (including brokerage paid to KPM) of 2% of the amount borrowed and an interest rate of 9.50%. Yes this is more expensive than the Banks but the margin able to be achieved by selling completed houses versus selling from the Plans far outweighed the financing costs for our developer.

In addition, whilst it can never be relied upon, the fact this was a 12 month project the developer also enjoyed the 12 months market value increase the Auckland market provided when it came time to sell! Selling from the Plans 12 months ago would have been at 12 month old market values.

A critical component to securing the best available financing packages is market knowledge of all of the Lenders out there and packaging your application in the appropriate manner with all supporting documentation which is where our experience come in.

If you are considering a Spec Build project and wish to discuss options please contact us on (09) 476 1199 or email on and we would be delighted to discuss your individual position and arrange a no obligation finance review meeting to more fully understand your situation.


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