Barrywhite,
My thoughts hinge on 2 important things
1. You have equity (in the form of the said property)
2. You would like to develop this property and sell (borrowing from your light bulb moment with ‘the merchant)
This deal is simple;
You employer has an arrangement with HF for Staff construction loans
Calculate your debt service ratios, i.e. …should be about 50% of your Net pay (guessing…and I am pushing this to the max assuming you can comfortably pay 50% of your
Get a valuation of the property done by HF’s registered valuers. (this will represents your equity input)
Get drawings and BQs and the necessary building requirements (HF will help you in this regard)…
Dependent on the value of the land, HF will definitely look at any devp that has 60:40 Debt/Equity, however if your equity (land) more than covers the cost of construction, your good to go and use the land as security forgetting this other property you were initially considering to use as collateral.
Build (say 3-6months) get to the roof, consider going prices for finished houses of similar size, and put the house on the market for sale and let the potential buyer finish the house to his/her specs.
This will make you serious colour, but a better deal would be to look for a fresh property where your equity input will be like 5% i.e. your down payment for land and interest costs
Propose to HF you would like to buy the ‘land’ and construct, and you have only the 10% dep for the land purchase but your debt service ratios can support serviceability to completion of construction.
Let me illustrate alternative 2;
Land costs say 5 mio. You must have 500K for the 10% and some additional float for legal fees etc.
Construction will cost say 4.5mio for a say 4 br maisonette; implying total project costs would be 9.5 mio plus say another 500k for additional incidentals. (this you must work out for yourself)
You apply for 9.5mio land and construction loan (assuming your service ratios are in order), you acquire the land within ninety days of SALE agreement and begin paying for the land (on reducing bal. basis) meaning that your only repaying that portion attributed to the land transaction, at this point you should be ready to construct and break ground say in1-2months (you would rather stall abit as your land appreciates after perfection of securities)… jenga to the roof in say 2-3months costing about 2.0 mio (your outstanding loan is now at 6.5mio after 5 months but 8 months after you executed the sale agreement)… say your land has appreciated conservatively at 20% in 8 months, to 5.4mio and you say your profit element from construction is say 100%, (the structure which cost you 2.0mio is now worth 4.0mio)…total value comes to 9.4mio. Sell the house even at 10mio as is. Repay loan 6.4mio, keep 3.6 mio (after having invested say 500k- as land depo +whatever other incidentals).. and move on to the next.
12 months tops for turnaround. Don’t complicate your life.