Hi all, im in the process of making some very big changes in my career, Im self employed in the food industry as i write this but have my business n the market. What im going to be doing in the future is property developing. Ive decided its sabout time i make this actually happen on a full time basis (ive built two units in the past)
check out:
http://www.realestatedevelopmentclub.com/
If you are serious about it, these people will guide you to building your own property development business.
They are mentors of ours, and are guiding us to builidng our own. Great people! Genuine!
Hope this helps!
I forgot to mention that they feature in API magazine on a regular basis!
It can be very hard to get residential finance if you declare yourself as a developer. If you intend on doing small projects, 1 or 2 per title, then best not to call yourself a developer.
Also it will be difficult to get finance if you sell your existing business as you won't be able to demonstrate serviceability.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
JHK thankyou for the link, i will take a look at that…
Terry thanks for your input also, i guess i don't need to declare myself a developer as such, that's just a technicality. Just so i know, why is it more difficult to get finance if i declare myself a developer ?
In regards to selling my business, well that just needs to be done. I've been doing it for a fair while and i need to make a change. I agree with you that serviceability will be a fairly big issue, but i pretty sure there is a way around it. There has to be. Can i use savings a serviceability ?
after GFC, every word about property developer… the banks will run miles away
The collapsing of Fincorp, bridgecorp etc… has highlighted the risk of lending money to property developer
I guess that Mirvac, Meriton, Australand ASX listed companies have some issue securing the finance but not the large extend of the small developers
The easiest way is to secure against your PPOR but risks involved…. correct me if I am wrong
Hi AD,
Obviously with setting up any business you will need a good property saavy solicitor and accountant. We made sure we got this right before starting anything else. Building a good team of experts and advisors around you is paramount. Adrian and Amber will guide you through all the necessary steps to building your own property development business. They are architect-builder developers themselves. Their studio business is based in Hurstville, NSW.I think you should still hold your business and run property development on the side. At least till you have 2-3 projects underway. If there is one thing I have learnt, its all about leveraging off other peoples time, money, knowledge and skill. Having the right mindset is paramount as well. Good luck with it all.
Aspiring Developer,
As others have already mentioned, the category of "property developer" is a trigger for your banker to increase shading because of the perceived risks involved in the field. They're all just terms – semantics I guess – but "investor" seems to strike a more positive note than "speculator" or "developer" right now! This, of course, may change in the future.
My recent personal experience has shown me that it's a good idea to go into discussions with the bank as an investor. In order to do this convincingly, investment needs to be your primary objective. I also believe that separating development and investment is good business planning. This can be done by underwriting your own developments as an investor. In doing so you should perhaps be transparent with your lender. It can work like this:
Your development entity purchases the property with the intention of developing for a profit. This is nothing more or less than a business proposition (that your lender will probably see as high risk) and requires a business plan.
In offsetting some of the perceived risk, you (or your investment entity) agrees to underwrite the development by buying all or part of the finished product. In this way, you can use your equity in other investments to help secure the proposed purchases and in doing so provide pre-sales that will diminish the risk for your development entity.
This should mean that you do not secure the development project directly to your investments. This is good for you, and good for the financier. The development proposal should stand up on its own, as should the investment proposition.
Hi Christian,
Have you had any experience with banks in terms of pre-sales to related entities?
Generally pre-sales will only be classified as such if you have 10% cash deposits and the sales are to non-related parties.
Now there are of course variations to this, but these terms will give you the least problems with your financier.
YoungInvestor wrote:Hi Christian,Have you had any experience with banks in terms of pre-sales to related entities?
Generally pre-sales will only be classified as such if you have 10% cash deposits and the sales are to non-related parties.
Now there are of course variations to this, but these terms will give you the least problems with your financier.
Yes I have. For the financiers it's a simple risk control. I believe you need to consider these "related party" transactions as transactions between entities. Establish the entities to serve their relevant purposes, and allow them the legal autonomy to do so.
In terms of cash deposits, I have purchased with 5% deposit (and recommend this to any investor as a matter of course) and would accept this as commercial between entities. In the end, you're effectively paying yourself the deposit, and you may be kind enough to allow yourself (as the vendor) to release the deposit via a S27 agreement as well :. the deposit amount becomes immaterial….having said all that, you still need the cash to engineer these positions.
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