Finance question
Can I get a residual stock loan on unsold apartments?
Often yes. A residual stock loan is secured on completed, titled units that are still unsold, and it repays your construction lender so you are not forced into a discount sale. Non-bank specialists commonly lend 65% to 75% of the as-is value, banks 55% to 65% and private lenders 70% to 80%, subject to lender assessment.
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The short answer
It buys you time to sell at full price, not a better price
Residual stock is the tail of a development: units still unsold when the builder hands over and the construction lender wants its money back. A residual stock loan, also called development exit finance, repays that lender, capitalises its own interest and is released unit by unit as sales settle. Lenders commonly take the lower of two tests, around 70% of the summed individual unit valuations or 80% of the in-one-line valuation, and the second usually binds once there are more than a handful of units (residual stock guide).
The reason to refinance is the alternative price. Stock sold in one line to an investor goes for 15% to 25% below the summed individual unit values, and a receiver or mortgagee sale can be 25% or more. Holding is not free either: six months of holding costs, agent commission and the 5% developer incentive that is now common come to roughly $85,000 to $90,000 on a $750,000 apartment, about 12% of the price. A facility only pays when the stock really does sell at full price inside the term.
Each unit is allocated a share of the debt, and most non-bank and private lenders set the release price at 105% to 120% of that allocation, so the loan comes down faster than the stock sells. Directors' guarantees are almost always full recourse, and lenders size the interest budget to a slow sales month. Ventas is a broker across 40+ lenders, so we match the stock, the sales plan and your guarantee position to the lender type that fits, with no upfront fee to you.
Do you qualify?
What a residual stock lender asks to see.
The construction payout
The payout figure and the maturity date of your current facility.
A schedule of unsold units
Asking prices, contracts on foot, and whether any units are already leased.
Title and a recent valuation
Units that are completed and titled, valued as-is net of GST.
A sales plan
Base case and downside settlements per month, with the guarantee behind it.
What the facility changes
The construction lender is repaid
No extension fees or default interest at maturity.
No monthly cash drain
Interest is capitalised for vacant stock.
You choose the sales route
Individual sales, priced to clear, or in one line, on your timetable.
A worked example
Five townhouses remain unsold from a nine-unit project: summed retail value $4.4 million, in-one-line value $3.9 million. The construction facility still owes $2.6 million and matures in 90 days. A facility of $3,120,000, which is 80% of the in-one-line value, pays out the construction lender and leaves fees, an interest budget and about $150,000 in the developer's hands. Selling in one line instead gives away about $500,000 against retail. Illustrative only.
Common questions
Frequently asked questions
How much can I borrow on unsold apartments?
Non-bank specialists commonly lend 65% to 75% of the as-is value, banks 55% to 65% and private lenders 70% to 80%. Lenders take the lower of about 70% of summed unit valuations or 80% of the in-one-line value.
How much do unsold apartments sell for in one line?
Bulk in-one-line valuations come in 15% to 25% under the aggregate of individual valuations. That discount is the number a residual stock facility is meant to beat.
Can I get one if some units are leased?
Yes, and banks refinance completed stock at 55% to 65% where some units are leased. The lender usually wants rent to cover interest at about 1.2 to 1.5 times.
What do I send to get a number?
The address and title status, the construction payout figure and maturity date, a schedule of unsold units with asking prices and contracts, the latest valuation, and whether any units are leased.