Hi guys,
I caught up with a Business Banker from a major bank who confused me.
I current am doing a joint venture with a business partner of mine and building two townhouses on one title and then subdividing at end. Property is in his name but I will be doing the construction as I am a registered builder. The banker said to me bank will only lend 65% on the on completion value and not 80%. I thought it would be 80% as it is only 2 units.
Also I am looking at refinancing an existing residential debt I have and property is vacant residential land. It is in the name of me as trustee for my own family trust. Property has planning permit to build 2 townhouses but I am not doing anything yet. Business Banker said bank will lend 65% against "as is" value now and if no permit would have been treated as "land bank" and is brought to 50%. Is this correct?
Can anyone tell me has the 80% LVR on resi gone out the door?
Appreciate any thoughts.
Thanks
Enzo
Enzo
On the first part sounds like he might be better off with 80% of cost rather than 65% of net GR value.
Second part – If all else is equal i think i would be looking to change Banks as 80% of land value is readily available.
Richard Taylor | Australia's leading private lender
Yes, since you are the builder you enter into a building contract with the owner of the land and the bank should be able to lend 80% of the contract value + 80% of land value. That should be more than enough to construct.
80% or even 90% on land should be possible
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
I am looking at doing a 6 townhouse development, with an expected end sale value around $2.4 million in today’s market, the construction cost will be around $1.45 million and I have paid 350k for the property initially, totalling $1.8M in costs.
So by the 65% rule, they would lend me approx $1.6 million for land and construction and I would have to fund the other $200k from my own money, plus fund the interest holding costs over the construction period. Does that sound right? Is there anything I am missing?
2.4mil x 65% = 1.56mil = max loan size.
But are you sure the vals will come in? They are likely to value all in one line, so may come in lower than expected
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
Thanks Terry,
Still exploring this further. Will engage with an architect / town planner in the next few weeks. When you say “all in one line” do you mean that they are not valued as strata titled units for individual sale, but instead together as a single block?
By the time the DA comes through I expect values in the area (Gladstone) to have increased and I am working on conservative sales values based on today’s prices. A few doors down they are selling similar townhouses (slightly inferior) for $430k now. (Mine will be 3 bed, 3 bath, 2 living, the ones for $430k are 3 bed, 2 bath 1 living).
I would work with local experts and have access to the bank’s valuation panel list to select the best valuer from to ensure I get the best possible valuation.
The lender has to think what will happen if you default and they have to sell the lot. So they often ask the valuers to value it in one hit, ie if it had to be sold to one buyer. This usually results in around a 10% lower val.
Also people are prone to err on the side of giving themselves a higher estimate. Make sure you have plenty of leaway as things can drag on and prices are usually higher than estimated.
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
Great advice thanks Terry, having just been caught $20k short due to construction delays and rushing around madly last minute to complete another settlement, I am starting to learn to allow for such contingencies.
Enzo,
It may simply be that you are going through the banks business channel rather than the residential channel.
They have different rules even if it is the same property.
For a 2 unit development, you should be able to use the residential channel for this and they will do 80% lends.
Good luck
GregMattnz
Curious to get a update on your Gladstone project.. drop me a email……
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