Unlock the secrets to land purchase for apartment builds

Buying land to build apartments works differently from a standard home loan

When you're purchasing land in the Snowy Mountains with plans to build apartments, you'll need construction finance that covers both the land purchase and the staged building costs. The loan advances in instalments as the build progresses, and you only pay interest on what's been drawn down at each stage.

This matters because apartment construction takes longer than a house build, and lenders treat multi-unit projects differently. You'll need council approval, a fixed price building contract with a registered builder, and enough equity or deposit to satisfy the lender that the project stacks up financially.

The real difference shows in how the money moves. You don't receive the full loan amount upfront. Instead, the lender releases funds at specific milestones, verified by a progress inspection. For a land purchase followed by apartment construction, the land component settles first, then building funds release progressively as the slab goes down, the frame goes up, and each stage completes.

What lenders look for in an apartment construction application

Lenders want to see a fixed price building contract, council plans with development application approval, and proof you can service the loan once the apartments are complete. The contract needs to come from a registered builder with appropriate insurance, and the price needs to match what the lender's valuer considers reasonable for that location.

In Cooma or Jindabyne, where apartment developments are less common than in metro areas, the valuer will pay close attention to comparable sales and rental demand. If you're building four units on a block near the Snowy Hydro precinct in Cooma, the valuer needs evidence that similar units have sold or leased at the price you're banking on.

You'll also need to show that you can cover the gap between what the lender will fund and what the project costs. Most lenders will go to 80% of the land value and construction cost combined, which means you need to bring at least 20% yourself, plus another buffer for cost overruns or delays. For a land purchase of $250,000 and a construction cost of $1,500,000, you'd need at least $350,000 in equity or cash, plus another $50,000 to $75,000 for settlement costs, planning fees, and contingency.

How the progressive drawdown schedule works for apartment builds

The lender releases funds according to a progress payment schedule that matches the milestones in your building contract. Typical stages include base stage (slab or footings), frame stage, lockup stage (roof and windows), fixing stage (internal fit-out), and practical completion.

At each stage, the builder invoices you, the lender arranges a progress inspection to confirm the work is done, and then releases the funds directly to the builder or into your account to pay the builder. You start making interest payments on the drawn amount as soon as each drawdown happens. Until the next stage is reached, you're only paying interest on what's been released so far, not the full loan amount.

For apartment projects, some lenders add a progressive drawing fee at each stage, usually between $300 and $500 per drawdown. Over six or seven stages, that adds up, so factor it into your overall budget. The inspection itself is organised by the lender and paid for out of the loan, but delays in getting the inspector out can hold up the release of funds, which can put you offside with your builder if they're waiting for payment.

The land settlement happens first, then building finance kicks in

When you buy land with the intention to build, the land purchase settles like any other property transaction. The lender advances the land portion of the loan, you take title, and then the construction funding sits there waiting until you're ready to start building.

Most lenders require you to commence building within a set period from the disclosure date, often six to twelve months. If you're buying land near Thredbo or Perisher with the intention to build apartments for short-term rental, but council approval or design work takes longer than expected, you need to keep the lender informed. Some lenders will extend the commencement period if you've got a reasonable explanation, but others will ask you to refinance the land component and reapply for construction finance when you're ready.

Once building starts, the construction loan runs on interest-only repayment options during the build. You're not paying down the principal, just covering the interest on whatever's been drawn. Once the build finishes and you get your occupation certificate, the loan converts to principal and interest repayments, or you refinance into a standard investment loan if you're holding the apartments for rental income.

Council approval takes longer in regional areas

In the Snowy Mountains, council approval for multi-unit developments can take several months longer than in metro areas. Cooma-Monaro Shire and Snowy Monaro Regional Council have specific planning controls around building height, density, and parking, particularly in areas close to alpine zones or heritage precincts.

If your land is near Jindabyne and you're proposing a three-storey apartment block, the development application will need to address parking for residents and visitors, stormwater management, and visual impact on the surrounding area. The council may require design changes before granting approval, which delays the start date and can throw out your construction timeline.

Lenders won't release building funds until you have full council approval in place. If you've settled on the land and you're paying interest on that portion of the loan while waiting for council, those holding costs add up. For a $250,000 land purchase at current variable rates, you're looking at around $1,000 to $1,200 a month in interest while you wait.

Why cost-plus contracts don't work with most construction lenders

Most lenders will only accept a fixed price building contract for apartment construction. A cost-plus contract, where the builder charges their costs plus a margin, leaves the final price open-ended, and lenders won't fund a project where they don't know the total exposure upfront.

If you're working with a builder who prefers cost-plus because the site has unusual conditions or the design is still being refined, you'll need to either negotiate a fixed price contract or find a lender who will consider cost-plus. The second option is rare, and when it's available, the lender will want a much larger deposit and more frequent progress inspections.

For apartment builds in areas like Berridale or Dalgety, where there are fewer builders with multi-unit experience, the fixed price contract also protects you. It locks in the price so that if materials or labour costs increase during the build, the builder wears the difference, not you.

What happens if the build runs over budget or over time

If the construction cost blows out or the builder goes over schedule, you'll need to cover the difference yourself or negotiate additional funding with the lender. Lenders won't automatically increase the loan amount just because the builder underquoted or because you made design changes halfway through.

Consider a scenario where you've purchased land in Cooma for apartment construction, and the builder quoted $1,500,000 for a four-unit build. Halfway through, the builder identifies structural issues with the site that weren't picked up in the soil test, and the revised cost is $1,650,000. The lender has already committed to funding 80% of the original $1,750,000 combined land and construction cost, which is $1,400,000. They're not obliged to fund the additional $150,000, so you either find that money yourself, scale back the build, or try to refinance mid-construction, which is difficult and expensive.

Time delays also cost you. If the build takes twelve months instead of nine, you're paying three extra months of interest on the drawn funds without any rental income coming in. For a project where $1,200,000 has been drawn down, that's an additional $30,000 to $36,000 in interest.

Owner builder finance is hard to get for apartment projects

If you're planning to act as an owner builder, most mainstream lenders won't touch the deal. Lenders want a registered builder with contract works insurance, and they want the certainty that comes from dealing with a licensed professional who's done multi-unit builds before.

Owner builder finance exists, but it's limited to specialist lenders who charge higher interest rates and require a larger deposit. For apartment construction, where the build is more complex and the risk is higher, those lenders are even more selective. Unless you've got a building background and you've completed similar projects before, you'll struggle to get funding as an owner builder for anything larger than a duplex.

If you're determined to manage the build yourself and engage sub-contractors directly, you'll likely need to fund a large portion of the project from your own resources, then refinance once the apartments are complete and you can show rental income or pre-sales.

How renovation finance differs from ground-up construction

If you're buying an existing building in the Snowy Mountains with plans to renovate it into apartments, that's treated differently again. A house renovation loan or home improvement loan will cover the purchase and the renovation costs, but the structure, approval process, and risk assessment differ from ground-up construction.

Renovation projects still involve a progress payment schedule, but the stages are different. Instead of base, frame, and lockup, you might have demolition, structural work, services (plumbers and electricians), and fit-out. The lender will still require a fixed price contract, council approval if you're changing the use or layout, and evidence that the end value justifies the spend.

For apartment conversion projects in towns like Cooma, where older buildings near the main street might be rezoned or repurposed, the lender will also want to see that the building is structurally sound and that the renovation cost is realistic. If the quote comes in light and the builder discovers issues once they open up the walls, you'll face the same funding gap problem as a new build that runs over budget.

Call us to talk through your apartment construction plans

Every apartment build in the Snowy Mountains brings its own quirks, from council requirements to builder availability to how the final units will perform in the local market. We work with lenders who understand regional projects and who'll actually look at what you're trying to do, not just tick boxes on a metro checklist. Call one of our team or book an appointment at a time that works for you.

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