Lending for developers is different from lending to mum and dad, residential property owners

Dominique Grubisa
Dominique Grubisa

Published 10:15 pm 7 May 2019

Facebook Twitter Whatsapp Linkedin

Did you know that lending for developers is different from lending to mum and dad, residential property owners? DG Institute Founder and CEO, Dominique Grubisa explains why commercial lending for a developer is different from residential lending. How commercial lending is actually easier and finally where to start if you’re looking to get financing for development.

Having trained hundreds of successful developers and watched the deals that they do, I can tell you that there is a world of difference when it comes to the way they finance their deals. You see, developers don’t do the same thing that mum and dad investors and owner occupiers do when it comes to property.

They use a different arm of the bank, different lending criteria. When we buy a normal residential property, we get a residential loan and that is regulated by APRA, the Australian Prudential Regulation Authority. They control how lenders advance finance to investors and to owner occupiers and there are lots of rules around that.

Right now, it’s harder to get a loan because of the Royal Commission, we’ve got higher lending standards and a lot more compliance involved and APRA is really getting a stranglehold on how people can borrow.

There’s less and less credit for residential investment but the development world and loans to developers are not regulated by APRA. It’s part of the bank that comes under discretionary lending – that means there are no rules, there are no regulations.

→ Exclusive Webinar Briefing Where You’ll Learn How To Accelerate Wealth & Cash Flow Through Lower Risk Small Property Developments

Lenders Questions

They look at it as a deal and their questions are:

  • Is there a risk here?
  • Is this a profitable deal?

These are all that they worry about. Commercial lending is deal focused – not borrower focused. When you’re borrowing to buy a home or a residential property – whether you’re buying it as an investment or to live in, the bank will look at you. They’ll assess you and responsible lending laws say that they’ve got to actually do a lot of work. They’ve got to make sure you can afford it, they’ve got to get your tax returns, your pay slips, what you spend each month, your expenditure.

A whole of stuff comes under the microscope and there is a lot of red tape around what, how, and who they can lend to. However, if you’re a developer, they’re not focused on you – they’re focused on the deal.

They’re going to ask:

  • How much money do you want?
  • How long do you want it for?
  • What are we going to get out of this?
  • What’s the profit in this development?

Development is about getting other money in to do the deal and it doesn’t have to be your money. Even the billionaires don’t use their own money and the beauty of it is if you’re doing a $20 million dollar development, the bank isn’t going to say to you, well, we need to see that 20% deposit, we need to make sure that you’ve got an income to service debt of $20 million dollars.

They don’t look at that, they look at:

  • What is the profit in this deal?
  • Are there pre-sales?
  • Have you sold any off the plan?

They’ll have those sort of requirements which is fantastic news for you because what you really need are the knowledge and the connections to be able to do development – not the bank balance.


Watch more videos on property development here.

Isn’t that refreshing? Even though it’s hard work to have to get knowledge, it’s not dependent on you having money and you don’t need money to make money. That’s just an excuse! You just need to have the knowledge of what to do and how to do it to find that deal to present to lenders and money partners to fund your vision of building that development.

Property Development Webinar Briefing

Good Debt Vs Bad Debt With Dominique Grubisa - DG Institute

Lawyer, Asset Protection Specialist and Property Educator

Dominique Grubisa is a practicing lawyer with over 25 years experience. She is a property investor and developer, an entrepreneur with businesses in Australia and Southeast Asia, a speaker, educator, writer and published author.

This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.

About DG Institute

Founded in 2009, DG Institute strives to empower everyday Australians to grow and protect their wealth. Our goal is to provide direction, motivation and inspiration to our clients and help them perform at their very best. We do that through our professional services, in addition to teaching them how to grow their wealth through property and business education.

This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.

Our Happy Clients

  • Lisa Mitchell

    "My name’s Lisa Mitchell. I live in Chatswood in Sydney. Since joining the Elite Mentoring Program. I’ve done two deals made around $240,000. And probably when I add the extra rental that’s coming, it’s another $70,000. I could not be happier with that result. And I’m amazed by it, to be honest, I’m absolutely amazed. […]"

    Lisa Mitchell, Property Uplift Elite Mentoring Graduate

  • Jennine Kimbal

    "Janine Kimball from Newcastle since joining DG Institute we have two projects currently in progress with a gross realization value of about 10 and a half million dollars expected profit from those is going to be probably around $1.8 million when they complete the reason we joined DG Institute and the Elite Mentoring Program, was […]"

    Jennine Kimbal, Property Uplift Elite Mentoring Graduate

  • Michael Kuligowski

    "Hi, my name’s Michael, and I’m from New South Wales. Since joining the Elite Mentoring, we’ve been able to secure three properties. Well, under market value, both in inner Sydney, New South Wales, also regional new South Wales and one in Victoria by, undertaking, this program, we’ve definitely benefited, and we can see that we’re […]"

    Michael Kuligowski, Elite Mentoring Graduate (Property Uplift & Real Estate Rescue)

  • Sharon Harvey

    "Hi, I’m Sharon Harvey. I’m from South Australia. I joined the Elite Program because I was looking for something more in property and I was looking for more education and somebody who would inspire me and Dominique was that person. I listened to her talk and realize that there was a great synergy between us. […]"

    Sharon Harvey, Property Uplift Elite Mentoring Graduate

You May Also like to Read

Property Development Finance 101: Everything You Need to Know

Are you trying to learn how to finance your next property development? Don’t worry, in this article we’ll cover all of...

Australia’s Hidden Economic Crisis

On the surface, Australia’s economy seems to be on the rebound from COVID-19. However, when you dig a little deeper,...

How Much Does it Cost to Build a House in Australia?

The Australian dream has always been to own property, but why not build your own?  Building a new home in Australia has...

Australian Wages See Biggest Drop in 20 Years

Australians are now getting less bang for their buck than ever as ABS data finds wage growth is at record lows.  On...

How To Make Huge Profits Through Property Development

Have you ever considered doing a small property development? Here are a few reasons you should quit considering it, and just...

NSW Bans Construction Amid Rising COVID-19 Cases

A ban was placed on all non-urgent construction within New South Wales amid rising COVID-19 cases. Cases of the Delta...