How would I finance a builders display home on our land?
We have an option to purchase block. Builder is keen to build a display home on the block and lease for 2 years.Normally, the builder would buy the block, build the house, open it up to the public and sell it with a leaseback.
The obvious answer would be to buy the block, commission the builder and lease it to builder after handover. Meantime the holding costs would prohibit this method including the progress payments and land loan interest payments.What other arrangement would a builder consider feasible? The final aim would be to move in after the 2 years to revert it to a PPOR.
Financing such arrangement would be exactly the same as if you were building an investment property that you in turn would lease out.
Finance would be arranged on the land and then stage payments on the ongoing construction. Interest charged only on the amount outstanding thus increasing with each draw down.
One option would be to ask the builder to offer you the lease from the date he commences construction so your interim interest costs are covered.
Other consideration to soften the blow is the non cash deductions which you would entitled to claim. Depreciation, building write off and of course any loan costs are all deductible.
Just check the local market to ensure that at the expiry of the lease the property can still be rented and you are happy with the rent you are likely to receive.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner.
Ph: 07 3720 1888
[email protected]Richard Taylor | Australia's leading private lender
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