Finance question
Can I get construction finance without presales?
Yes, but not from every lender and not on the same terms. Banks usually want qualifying presales covering a large share of the debt. Non-bank lenders ask for 30 to 50% presales or none on a strong sponsor, and private lenders will proceed with no presales, which is why roughly half of small construction facilities now settle without presale cover, subject to lender assessment.
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The short answer
Presales are a lender's comfort. Without them, your margin does the job.
Each lender type treats presales differently. In our townhouse development cost guide, senior bank construction debt usually wants qualifying presales covering a large share of the debt. Non-bank senior lenders ask for 30 to 50% presales, or none where the sponsor is strong. Private senior lenders will proceed with no presales, and the guide has roughly half of small construction facilities now settling without presale cover (townhouse development cost guide). So it can be done. What you give up is price and flexibility, because private money costs more and is often a shorter facility.
Without presales the lender has no sales evidence, so it leans on your margin. The guide's benchmark is 20% profit on cost, with 15% the floor below which a project is generally not bankable, and 25 to 30% expected if you want to build with no presales. Most small townhouse projects are landing at 10 to 18% on current costs, so many first feasibilities fail the no-presale test as written. The fix is usually in the numbers rather than the lender: a lower land price, a tighter build tender, or presales on part of the project.
Some projects never have presales because there is no sale at the end. In build to rent the developer holds and lets the dwellings, and the guide has bank construction debt at 55 to 65% of cost, non-bank lenders at 65 to 75% with no presale condition, and private first mortgage lenders reaching 80% on smaller townhouse or house projects (build to rent guide). For a build-to-sell project, a proven builder, a track record of finished projects and land bought well below market all move a lender toward yes. Ventas is a broker across 40+ lenders, and we package the feasibility for the ones that fund without presales. There is no upfront fee to you; the lender pays us on settlement.
Do you qualify?
What a lender wants in place of presales.
A strong margin
A feasibility well above the usual 20% on cost.
A track record
Finished projects for you and a builder the lender recognises.
Equity in the deal
Land at an accepted valuation plus cash for the gap.
A fixed price contract
A signed build contract and a quantity surveyor's cost report.
Why builds without presales still get funded
Private lenders say yes
They proceed with no presales, at a higher price.
Strong sponsors skip them
Non-bank lenders may waive presales for a proven developer.
Not every exit is a sale
Build to rent is funded with no presale condition at non-bank level.
A worked example
A developer's feasibility for six Brisbane townhouses shows a 12.6% margin on cost against $7.5 million of gross sales. That is below the 15% floor and nowhere near the 25 to 30% a lender wants with no presales. Buying the land at $1.2 million instead of $1.5 million lifts it to roughly 19.5%. Presales on 30 to 50% of sales, two or three of the six townhouses, then give a non-bank lender something to assess. Illustrative only.
Common questions
Frequently asked questions
Do banks lend for construction without presales?
Not usually. Bank senior debt typically wants qualifying presales covering a large share of the debt. Without them the project normally goes to a non-bank or private lender.
How much margin do lenders want if there are no presales?
The guide's benchmark is 20% on cost with 15% as the floor, and 25 to 30% is expected where a lender is asked to fund with no presales. Most small townhouse feasibilities are landing at 10 to 18% at current costs.
Do private lenders really ignore presales?
They are the most willing to proceed with no presales, and roughly half of small construction facilities now settle that way. In exchange the facility costs more, and the lender examines the margin, the builder and your track record closely.
Can I fund a build to rent project without presales?
Yes, because there is no sale at the end. Non-bank lenders fund 65 to 75% of cost with no presale condition, and private lenders reach about 80% on smaller townhouse or house projects, subject to lender assessment.