Development cash flow: contributions, drawdowns and settlement

Is cumulative cash invested the same as the peak funding requirement?

No. Cumulative contributions describe the total money put in under a stated convention; peak funding measures the largest outstanding cash gap at a particular time. Interim rent, sale receipts, tax payments and recycled funds can make the two differ. Prepare a running schedule rather than subtracting the final loan balance from total costs. The schedule should also identify funding that is approved but unavailable until a condition is met.

How much owner cash is needed beyond the property deposit?

List every payment that borrowing will not cover, rather than applying a deposit percentage to the purchase price alone. Duty, acquisition fees, consultants, uncovered construction work, holding expenses, interest and pre-sale spending may fall to the owner. Include their due dates and any required contingency. A lender’s approved structure determines which costs can be funded, so a purchase deposit is only one line in the cash plan.

Why is a construction facility limit different from cash available today?

A facility limit is the ceiling of an agreed borrowing arrangement, not proof that the entire sum can be used immediately. Model the drawdown conditions in the actual approval, including evidence, inspections and owner contributions where required. If an invoice falls due before a drawdown can occur, show the temporary owner funding. Do not use the unused portion of a facility as a substitute for an available cash reserve.

How should construction-loan interest be estimated?

Estimate interest from the outstanding drawn balance over time, using the facility’s actual terms. An average-draw percentage can be useful for an early scenario, but it is a simplification rather than a verified construction cash curve. Test earlier or larger drawdowns and a longer period before repayment. Include applicable fees separately, and state whether interest is paid by the owner or added to the loan balance.

Which holding costs should remain in the model during a delay?

Keep the costs that continue until their real stopping point, such as finance, rates, water charges, insurance, security and maintenance. Some charges change when the use, ownership or construction stage changes, so a flat monthly allowance needs review. Use bills, quotes and professional input rather than copying another property’s defaults. The relevant end date may be sale settlement or refinance, not the day the builder finishes.

Can selling the front dwelling first fund the rear construction?

It may change the cash schedule, but only if the sale can settle and the lender permits usable proceeds to be released. Check title readiness, outstanding subdivision conditions, mortgage arrangements and the required debt reduction. Model the amount left after settlement deductions rather than the gross price. Also test a delayed front sale, because relying on that receipt for committed rear works creates a specific funding dependency.

Does a higher loan-to-value ratio make the development more profitable?

It can reduce owner cash contributed, while increasing interest, fees or financing constraints. That may change a cash-return percentage without improving the development’s underlying revenue or construction costs. Compare absolute profit, total debt, repayment conditions and downside owner contributions together. Use only a documented lending scenario and test a lower approved amount; a spreadsheet setting cannot establish lending availability or suitability for the borrower.

Can existing rent pay all holding costs while I build in the backyard?

Include only a supported net-rent scenario that allows for the actual construction arrangement. Management, vacancy, maintenance and interruptions can reduce the amount available, while shared access or service work may affect occupation. Keep rent assumptions separate from the development sale proceeds and show a reduced-rent scenario. Do not count the same income as both cash funding and an additional profit uplift unless the entire model reconciles.

Why can tax cash timing differ from the tax expense in the feasibility?

The expense estimates the eventual liability, while the cash schedule records when money leaves or returns. GST withheld at settlement is credited through the tax process, so settlement cash and the final reconciled position can differ. Keep separate lines for withholding, the expected liability and later adjustments. Do not fund a payment due today with an assumed refund date that has not been confirmed by the tax adviser.

Source: [1] ATO: GST at settlement

When should the funding plan be updated?

Update it whenever a material payment, approval, borrowing term or expected receipt changes. Useful review points include purchase commitment, permit conditions, contract signing, variations, revised construction dates and each sale. Replace estimates with actual invoices and drawdowns while preserving the original baseline for comparison. Escalate a future negative balance early, before the next contract or purchase order makes that funding gap harder to manage.