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Are pre-sales needed for a development loan?


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If you’re looking at development loans, you might be wondering if you will need to make any pre-sales in order to qualify for approval. The answer to this depends on which type of development loan you choose to apply for. For a residential development of four units or less, most of the time, pre-sales won’t be needed unless you’re choosing to develop in a rural or hard to sell area.

In the case of commercial development of more than four units, it’s up to your lender whether or not they will need to see any pre-sales to continue forward with the development, though there are many other factors that can influence the need for pre-sales.

Read on below to find out everything you’ll need to know about development loans and pre-sales.

What is a development loan?

A property development loan is designed to fund the construction of multiple properties under the same title. For developments of up to four units, funding falls under a residential property loan. For any larger development, a commercial property loan is needed.

Residential development loans vs commercial development loans


When looking at property development loans, it is important to understand the two different types. Knowing which loan is right for your development will save you both money and time spent lodging documents, and get you on your way to building much faster.

Most lenders split property development into two parts, which can have very different approval processes, fees and interest rates.  

  • Residential- Most lenders define residential property development as a small scale development of up to four units.
  • Commercial- If your property development is greater than four residential units, lenders are likely to class it as commercial property development. This can range from a series of commercial properties to an apartment complex. 

Are pre-sales needed for a development loan?

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In short, it depends on the type of development loan that you have applied for. In the case of a residential development loan, you probably will not need to pre-sell any of the properties or units in the development in order to get approved for a loan, since a residential development is anything up to four units. However, your lender may have exceptions to this rule if you are planning to build in an area that is not considered metro, or inner-city.

If you have planned to develop in a particularly rural location, this may be seen as a higher risk by your lender. It’s always worth having a conversation during the application process with your lender about pre-sales, and if you will need to complete this step. Every lender is different, and may have different expectations when it comes to pre-sales and development loans.

In the case of commercial developments, it can be a little more complicated.  For commercial developments, some lenders may require pre-sales before they will approve your loan. The percentage of pre-sale is generally up to the lender, and how secure they see your development as being, among many other factors, including location and space.

If you are developing a commercial space and are unsure on the amount of pre-sales you may need in order to be approved, it’s best to check with your lender as early as possible to avoid any confusion.

Where does Tiger Finance come in?

With Tiger Finance, we can help to get you a hassle-free development loan. You will have a free consultation with one of our specialists, and we will tailor-make you a loan. We will negotiate with lenders on your behalf before you are approved.

We have helped countless Australians with both good and bad credit ratings to be funded for their dream development. We understand that lending criteria from other lenders are too strict and can stop you from achieving your goals.

How we can help

Our finance specialists can help you find the right development loan for your project. Development loans are a complicated topic, but we will find a loan that makes your dream project that much easier.

If you are one of the many Australians finding getting a development loan difficult, Tiger Finance can make the process simple and pain-free. Call one of our loan specialists for your free initial consultation today!

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