Gross Realisation Value (GRV) Loans

GRV loan is a loan that is based on the Gross Realisation Value (GRV) of a property development project. Banks, private lenders, and development finance providers use the GRV Loan as a way to evaluate the potential profitability of a project, and to determine how much funding they can provide to the borrower.

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The lender uses the projected GRV Loan as a way to verify the borrower’s ability to repay the loan

Gross Realisation Value (GRV) is a financial term used in the context of real estate or investment. It refers to the total amount of money received from the sale of an asset, such as property before any expenses or deductions are taken into account. It is calculated by taking the sale price of the asset and adding any other income derived from the sale, such as rent received during the period of ownership.

In real estate, the GRV Loan is used to determine the overall profitability of property investment. If the GRV Loan is higher than the total amount invested in the property, including purchase price, renovations, and holding costs, then the investment can be considered successful.

What is a GRV Loan?

GRV, or Gross Realised Value, is a term used in the real estate and development industry to refer to the total value of a property development project upon completion. Lenders use GRV to determine how much funding they can provide for a project, as it serves as an indicator of the potential profitability of the investment. It takes into account the final sale price of the property, as well as any other income generated by the project, such as rent during the development period. Most of them will fund with GVR, but GST is not included in the calculation.

How do GVR and property development loans work in Australia?

Private companies and individuals finance GVR finance from private lenders.

The usual term of a GVR development loan for property development projects is two years.

It requires the construction work to be completed, marketed, and sold within the same timeframe. It also reduces the lender’s risk.

Private lenders finance loans on their own in a way that is typically less cautious about appraisals of projects for development than conventional banks. Any professional with experience in property development will explain the value of a property. It can determine the success or failure of the application for a mortgage development, particularly when a traditional lender is involved.

Private lenders are less worried if this is your first time developing property (or one of your first development projects) than a conventional bank. Private lenders are more likely to assess the finance project’s possibility than your previous experiences as an entrepreneur. However, chances are high that you will get GRV Loan finance approved without any hassle with them.

Of course, regardless of whether you have any previous property development expertise, both lender and borrower must ensure that the financials on your project are in line. It’s also essential to have any development approvals and have your builders organised if you’re an owner-builder or developer-builder applying for GRV Loan finance in Melbourne. The BFL expert team is just a click away. To help you finance your dream project, contact us.

How to apply for GVR Loan?

It is widely known that obtaining development finance from a large bank is becoming increasingly difficult. Similar to the GFC times, when it was nearly impossible to get finance, more stringent controls continued to be implemented.

Banks typically require 100% financing for debt from pre-sales. In addition, they have reduced the number of hard costs that they’ll finance.

However, there are other non-bank lenders as well as private lenders who can view projects in a different way than the big banks. Developer finance lenders will calculate the project’s gross realization worth (GRV) instead of the standard project’s hard costs or the total development cost (TDC) method for calculating the amount they’ll provide and GRV Loan finance later.

The main things that traditional development finance lenders are less focused on:

  • Does the project make any sense?
  • Profit is there any huge margin of profit?
  • The people working on the project have experience in development.

Private lenders are much more relaxed when offering GRV Loan finance in Melbourne or anywhere in Australia.

What are the requirements of GVR finance?

As mentioned earlier, your experience as a property developer is relatively minor for specialised development private lenders. They evaluate each project, considering the building itself, its location, and marketability.

The benefit is twofold:

  1. Private lenders don’t require a thorough examination of your financials. Your financials as developers can appear stunning the first year but could be better the following year when you’re getting your project off the start.
  2. If you’ve got an excellent development plan and are in a desirable location that is difficult to build pre-sales, they may be more flexible regarding pre-sales.

For instance, if you’re building 20 units for Owner-Occupiers in Bondi, It will be difficult to sell pre-sales compared to 30 investment-grade properties in Albion.

Special private lenders provide more flexibility and a greater understanding of the GVR Loan application and requirements if a bank takes the generalised approach.

Types of Property Development Loans: GVR vs TDC

There are two alternatives for financing property development:

  1. Total Development Cost (TDC)
  2. The Gross Realisation Amount (GRV)

Total Development Costs (TDC)

TDC refers to the full price for your development project comprising:

  • Costs of purchasing a property
  • Costs of construction
  • Interest costs for financing
  • Other associated costs for holding properties (like insurance and council rates)
  • Costs for sales and marketing of properties (for instance, advertising for tenants)
  • Certain private lenders may be willing to lend to a larger portion of the TDC than other lenders (for instance, 90 percent)

Gross Realised Value (GRV)

The GRV Loan​, on the other hand, is the expected completion value of a development project. However, it’s important to recognize that the GRV Loan could be much higher than TDC if you significantly increase your property’s value by developing it.

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Advantages of GVR Loan

  • No (or minimal) pre-sale requirements
  • Minimal documentation requirements
  • There are no credit checks
  • Minimal requirements for equity/deposit
  • No experience in property development projects is required
  • The repayment and terms are customised to meet the needs of the project
  • Settlements and approvals that are fast-tracked across Australia

Disadvantages of GVR Finance

The repayment period is short, and you need to pay the loan in two years.

Case Study: GVR-Based Loans in Melbourne

One of our Melbourne-based developer’s clients approached the most well-known banks to get development financing for an apartment complex with multiple residents. Following an extensive review, the bank suggested the conditions to the client that it would provide the loan at TDC of 70% and require 40 percent units to be pre-sold.

These terms are unacceptable to the client and will irritate the customer. The disappointed developer approached Basic Finance Loans and requested the GVR Loan Melbourne. Our expert panel agreed to approve his loan for property development to 80 percent TDC by one of our private lenders without any pre-sales conditions. It allowed him to begin the development Project in time. The construction was completed in just 16 months and with huge satisfaction.

Case Study: GVR Finance in Sydney

Our client in Sydney has discovered an opportunity to develop a hugely profitable property in an attractive area. It was a very time-sensitive opportunity. Instead of undergoing the lengthy process for banks, the client contacted Basic Finance Loans to get an offer. We were aware of the urgency, and with no further delay, we helped him approve the GVR loan for the development project.

Our professional team works all day and night to link one of our private lenders with him in the shortest time possible and with the most favourable terms. The client accepted our lender’s offer the same day and got the GVR finance credit in his nominated account the next day.

Frequently Asked Questions (FAQs)

How much can I borrow as GVR finance?

For a multi-residential development project, you can borrow up to 85% of the total development expenses (TDC) and up 70% of the upon completion value without GST.

Maximum Facility Limit: Maximum Up to $15 Million.
Maximum term: It can be stretched up to 18 months

What minimum deposit/documentation/security is required for a GVR loan?

The minimum deposit, documentation, and security required for a GRV loan may vary depending on the lender. However, some of the common requirements include:

  1. Minimum deposit: Most lenders will require a certain percentage of the total project cost as a deposit, which can range from 10% to 20% or more.
  2. Documentation: Lenders may require detailed documentation of the project, including plans, cost estimates, and projected cash flows. They may also require personal financial information and documentation such as income statements and tax returns.
  3. Security: Lenders may require that the borrower provides security in the form of a mortgage on the property being developed. This will typically be the case if the loan-to-value ratio of the project is high.
  4. Insurance: Lenders may require that the borrower takes out insurance on the property being developed, including builders’ risk and public liability insurance.
  5. Experience: Lenders may also look at the borrower’s experience in property development, as well as their credit history.

It is important to note that the requirements may vary depending on the lender and the specific terms of the loan. It is recommended to check with the lender or a mortgage broker for the specific requirements and if you have any doubts.

Can I get a GVR loan from the government of Australia?

Yes, but due to the complex paperwork and time taking processes of property, developers always prefer to connect with a private lender. Contact us to get started with a free assessment.

What is GVR In Finance?

A Gross Realisation Loan is an excellent financial option that is the most popular choice among property development companies and individuals. In the context of real estate development, GRV is used to determine the overall profitability of property investment. If the GRV is higher than the total amount invested in the property, including purchase price, renovations, and holding costs, then the investment can be considered successful.

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