Hi all,
Basically my fiancee and a business associate have placed a $1000 deposit on a block of land in South East QLD. We are all from Sydney. The project will be a 3 bed Duplex (2 x 3brm) at a total cost of $330k ($115k land + $215k construction).
Now my fiancee is self employed however her ABN is only 3 months old yet she was trading for a 2 year period with a side business (This can be verified by her accountant). She earns $45k pa. Her business associate is a PAYG applicant and earns approx $24k pa however she owns outright a $420k IP in Springwood, NSW so the associate is asset rich as opposed to my fiancee.
They have secured a builder and plans are drawn so all is well on that end. The sell price for each duplex will be $250k and rent is approx. $240 – $250k each / wk.
Now what would be the best solution to finance? My first thoughts for them was 80 – 85% LVR Asset Lend on the property (I saw the new RAMS Products). At 85% Asset lend it would be fine I guess but any lower and they will be a little short or do an 80% self employed no doc / low doc on my fiancee and her business associate???
Or is their only option a contruction loan which is great but more constricted so they’d prefer a line of credit where possible?? Its a little confusing.. [glum] so they need some guidance.
Time is of the essence as there is a finance clause involved as well! Appreciate any advice you can give.
Thankyou for your Time.
Hi bernstar
They sound confused as to what they want and what they are trying to achieve so i guess this may not be the best time to jump in and do what i assume is their first development.
You mention that your fiancee has been trading previously so assume that her other ABN is > than 3 months old.
If her business associate is wishing to offer his property as security then a LOC would be possible and you could fund 100% of the required amount however if the security is the land and then the ongoing construction an interest only construction loan will be the only choice until the project has been completed.
Another consideration is the LMI – GE will not allow two dwellings to be constructed together on a lodoc / nodoc loan, PMI will do so and will allow PAYG lodoc although you are lmited there with the choice of lenders.
Haven’t used RAMS recently but they never used to allow construction although this may have changed but i doubt it. If this is the case you will be limited to 80% LVR at a sensible rate of interest. As i mentioned earlier in the reply if your fiancee’s business associate intends to offer his property as part security this will change.
All in all more information would be required to give an accurate assessment however in saying that there are many nodoc / lodoc loans than can be approved very quickly to meet the relevant finance clause.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
Perhaps what you can do is try first to sell off the plan, but then thats providing that you have all building permits ready to go and basically just need to have the funds to push it along. I think, go find a real estate agent, and see what they can do. I can help you take care of the artist impressions of the housing, since that is one of the biggest issues with selling off-the plan, is that people want to know what the house looks like. I used to work for a developer and having gained quite a good relationship with their sales team, they usually say that its the images that speaks to the buyers most of the time so PM me if you are interested.
David
Want to sell off the plan quick? You need an Artist Impression. PM or Email me for more info.
Hi,
Thankyou all for the responses. No they are very much on the ball and Ill also be assisting with the managment etc. as I do have development experience however it is merely the finance they need to secure.
They are contacting a broker tomorrow to achieve some options however if they could simply have access to the equity say in my financee’s associates home then we could purchase the land and have plans approved etc. as hemma was saying and sell off plan however I dont know what the max possible LVR could be if they were to access equity. And yes very interested in an artist impression [cap] however they’d want to secure this finance first which personally dont see a prob if such a security is offered? I think?[eh]
“If her business associate is wishing to offer his property as security then a LOC would be possible and you could fund 100% of the required amount”What sort of loan would they be looking for if they wanted to do this? It would really be great if there was a simple way to fund 100% of the entire development. I guess theres heaps of products out now.
Yes if they are willing to offer the security of her business associates property then maybe a land loan secured against the block and a line of credit secured against the home.
Best of both world as you would have access to the funds when you needed them through a LOC although the land will still be mortgaged.
Email me if you need any further help on this one as it appears a straight forward deal.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
Richard is correct in that RAMS don’t lend for construction loans on a No Doc or Low Doc. There are a few lenders out there that can lend up to 75% LVR based on the end value of the project based on a No Doc with 1 day ABN. This should be enough to cover the costs of construction.
But the best way forward would probably be as Richard suggested to get a loan on the land and a LOC on the other property and use that to build.
Terryw
Discover Home Loans
Parramatta
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Hi as mentioned above the option of a development loan at 75% of the project end value could be beneficial. (lodoc)
You mentioned the end val of approx 500K, therefore 75% would be around $375K which would cover any unexpected or not calculated costs like strata titile costs etc.
You pay a slightly higher interest rate…
At the end of the project if you have trouble selling them and need to hold for an upturn in the market you could convert to a cash flow manager loan which would put them in a cashflow positive, at an 80% lodoc lend. ie: 80% $400K (approx $100 positive cashflow in the first year) However these cash flow loans to attract a DEF and capatilise some of the interest.
regards
kylieS
Mortgage Consultant
[email protected]sorry thats $100 per week cash flow+ in the above scenario
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