Everything You Need to Know About Multi-Unit Development Sites

As a tradie looking to expand beyond single builds, multi-unit development sites present an attractive opportunity to scale your business and create multiple income streams. Whether you're a registered builder wanting to tackle bigger projects or an electrician or plumber looking to diversify, understanding how construction loans work for multi-unit developments is crucial.

What Makes Multi-Unit Development Different?

Unlike traditional home builds, multi-unit developments involve purchasing suitable land and constructing multiple dwellings on one site. This could mean townhouses, units, or apartments. The loan amount required is typically much larger, and lenders assess these projects differently than standard construction loans for tradies.

When you're applying for a loan for a multi-unit development, you'll need to demonstrate your experience and capacity to manage a more complex project. This includes showing you can handle multiple trades, pay sub-contractors on time, and meet construction milestones within the agreed timeframe.

Understanding Construction Loan Structure

Multi-unit development construction loans work on a progressive drawdown system. This means you don't receive the full loan amount upfront. Instead, funds are released in instalments based on your Progressive Payment Schedule as you reach various stages of the project.

Here's how it typically works:

• Land purchase: Usually requires 20-30% deposit
• Construction phase: Funds released at predetermined milestones
• Progressive payments: Made against completed work stages
• Interest charges: You only pay interest on the amount drawn down

This structure helps manage cash flow and reduces your interest burden during construction. Many lenders also offer interest-only repayment options during the building phase.

The Application Process and Requirements

When you access construction loan options from banks and lenders across Australia, each will have specific requirements for multi-unit developments. The streamlined application process typically includes:

1. Development application approval from council
2. Fixed price contracts with detailed specifications
3. 'As if complete' valuation of the finished project
4. Council plans and permits all approved
5. Evidence of your building experience and qualifications

Lenders will also assess Out of Contract Items not included in your fixed price contracts. These might include landscaping, driveways, or additional fixtures that could affect the final valuation.

Location and Planning Considerations

Choosing an ideal location is critical for multi-unit success. You'll need to research council restrictions and council regulations that might limit your development options. Some areas have height restrictions, density limits, or specific design requirements.

Before purchasing, make a plan that considers:

• Zoning requirements for multi-unit construction
• Infrastructure availability (water, sewer, power capacity)
• Market demand in your target price range
• Whether you need to demolish existing property or can build on vacant land

Remember, most lenders require you to commence building within a set period from the Disclosure Date, typically 6-12 months.

Managing Costs and Payments

Multi-unit developments often involve additional payments beyond standard new build costs. These include:

• Progressive Drawing Fee charged by lenders for each payment
• Higher council fees for multiple dwellings
• Increased insurance costs during construction
• Larger bond requirements for utilities connections

The interest rate on multi-unit construction loans may be higher than standard home loans due to the increased complexity and risk. However, the potential returns can justify these costs when projects are well-planned and executed.

Alternative Funding Options

Depending on your situation, you might consider other financing approaches. House & land package loans for tradies could work if developers offer multi-unit packages. For major home renovations to existing multi-unit properties, a home improvement loan might be more appropriate.

Some tradies also explore equity release loans for tradies to fund deposits, especially when expanding your property portfolio into development work.

Working with the Right Broker

A renovation mortgage broker who understands construction loans can help you navigate the complexities of multi-unit development financing. They can compare options across multiple lenders and help structure your application for the optimal outcome.

At Tradie Home Loans, we understand that plumbers, electricians, and other tradies have unique income patterns and project requirements. We work with lenders who recognise the value of trade expertise in development projects and can access construction loan options that align with your business needs.

Multi-unit development represents a significant step up in scale and complexity, but with proper planning and the right financing structure, it can provide substantial returns and business growth opportunities for experienced tradies.

Ready to explore multi-unit development opportunities? Call one of our team or book an appointment at a time that works for you to discuss your construction loan options.