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Thanks for the feedback Richard, where were they selling? My understanding is that they deal solely with large developers, I won’t mention names, but one of them I’ve experienced low vals on most of their deals, I multiple states, but mostly because they spec their units up rather than the resale value not being there. I’ll bring your comments up with them though, the guys who run it will find them interesting.
Hi Richard,
hanks for he reply, it would be a different business as they are Sydney based. I’m highly confident they are not in any way dodgy, just interested in customer experience its always a bit of a risk being seen to be attached to a third party so its best to do some independent research before reaching any agreement. These guys are actually in the middle of floating on the ASX, as well as operating under their own AFSL, so everything is open to scrutiny, the only thing I’m missing is some customer feedback. The prospectus is probably worth a look actually as they are very profitable and selling on an 8.8% fully franked yield, I’m going to take a small number of shares regardless of whether I end up doing business with them or not.
I would be great to catch up when you’re down here. There has been no reduction in demand for private funds so there are still plenty of great opportunities.
I use Vow Financial as an aggregator. They have a formal mentoring program and there are a lot of other brokers in the group that are prepared to take people on also. I’m mentoring a couple myself at the moment, but I couldn’t take on another one personally unless they had a crazy amount of business to write, its just not worth it unless you charge a fortune, which I can’t bring myself to do. I am happy to hook you or any other aspiring broker up with someone who can help you though, jut let me know if you would like any help.
Hi Ajay, You should just treat finance costs as another project cost same as the actual construction, council fees etc. Thisis how lenders look at it also.
Hi Shane,
What you are after is not too difficult as long as you don’t expect bank lending rates and fees. 6 Units with no presales is very difficult with the majors, even where you income is strong they often knock doe the LVR and/or discount the valuation. Please let us know how you go with financing his project.
Most lenders will want presales – there are a few lenders that will allow you to not have any presales however in those cases you would need to be able to service the debt without the use of the proposed rental income of the construction. Therefore servicing would need to be very strong.
This is true with regard o the major lenders, to get something outside of this criteria you have to go to the non banks, of which there are relatively few active in this area of lending, and be prepared to pay a lot more money in terms of fees and interest rates.
Be aware that valuation is not always taken as for buy and hold purchase.
It is important to understand that most lenders would reduce valuation from MARKET VALUE to ALL IN ONE LINE VALUE, resulting in APPROXIMATELY 15% discount. It means that approved LVR of, lets say, 65%, is calculated fron the lower base. It is possible to find the lender who would look at full market valuation, but they are minority. And is also assessed on case by case bases, depending on: developers experience, equity, servicability etc.
In one line discounts are not generally a issue for commercial loans, where it is applied the discount is generally 20%. CBA are the most aggressive in applying in one line discounts, but even with them you can have it waived.
Do banks approve MUD construction loans if more than 80% of the units are pre-sold after development approval?
Presale requirements are generally quoted as a percentage of debt coverage, so 80% of units will likely be a lot more than 100% of debt. Most lenders want 100% debt coverage, but you can get away with less with some. Meeting a presale requirement does not mean you will definitely get an approval.
If you want to invest the $50K then you should pay the loan down to $100K, refinance and borrow the $50K back in a seperate account which you would use only for investment purposes, this will make claiming interest on tax far simpler.
CBA rate specials, mentioned above, have been extended to the end of this month.
I don't need anyone myself but I know my aggregator is looking for new loan writers for some of the larger groups, I'd be happy to hook you up. I have no idea what sort of remuneration they offer, it won't be $150K per annum though, I can assure you. To earn that sort of money you need to be generating a lot of work and at that stage you will be wanting to work for yourself.
My 2 cents worth. With a strong capital base behind you I don't think residential property (unless you are developing) is going to do that much for you except provide a management and potentially cash flow headache. I would strongly suggest you look at commercial property, you can buy very good quality properties with that amount of capital. As a passive investment quality commercial property, with a well written lease and good tenant, provides a much higher quality cashflow than resi property. Development is another area you could consider if you want to be more active.
That is great, but it has no relevance to planning in Victoria. Planning legislation is a State issue , it is not national, and as stated there would have to be a complete rewriting of planning legislation in Victoria for this to happen here.
Lovely dream Wilko, but its not going to happen. This would require totally rewriting the legislation relating to town planning. At the moment the individual councils are the planning authority in their geographic area and they can choose, and often do, to delegate responsibility to their planning department. To have authority to sign off on anything, under the existing legislation, a planning consultant would need to be delegated authority by the specific council they are dealing with the same way that council planning departments are, it is not possible for there to be a central certifying body under this legislation. I hope I'm wrong though.
In Frankston the cost will be at the lower end of what I quoted. You can probably just get draftsperson to do the design and planning application.
You should be asking if the people you are using are any good, the cost in terms of fees will likely be inconsequential compared to the cost of using poor quality consultants. Depending on where you are building I would expect costs of between $10K – $20K. In some areas you can just get the designer to do everything, in others you would want to use a consultant town planner as well, which would bump the cost up between $6K – $8K, hence the large range. The time frame can be as little as 3 months but 6 months is a more realistic minimum, it shouldn't take more than 12 months.
How long is a piece of string? It depends heavily on what you are trying to get approved. I'd also make the point that the quality of the consultant can have a heavy baring on:
1. If you get an approval at all;
2. How long it takes to get an approval;
3. What is approved;
4. How expensive it is to build
5. What price you will get for the end product
What I'm trying to get at is that you are asking the absolute least important question.
Just to add a bit of variety to the conversation, you can order your own val report with many commercial lenders and have them assigned. A lot of borrowers like doing this because they feel more in control, but in reality it is not a great idea as the valuer is not going to put themselves at risk by valuing the property higher than they would if they were instructed directly by a bank. Further, the bank generally have set prices and time periods that the valuers must meet, so generally customer ordered val take longer and are more expensive.
Freckle wrote:Matt_Arnold wrote:Eg. A $300,000 loan over 30 years at 5.98% paid fortnightly with an avetage of $10,000 in the offset account for the life of the loan will reduce the total interest payable by $45,575 !Jeez I hate these BS examples. The true power of Offset accounts are not in the piddley amounts of small change you might save over a time period but the ability to keep capital unencumbered so it can be deployed quickly with sensible amounts of leverage to generate a return. The above example is nominal not real because it fails to include the lost tax deductability which in effect reduces the end result considerably. Scale for inflation and the savings wouldn't buy a coffee once a week. People also need to realise that banks offer products usually in conjunction with other products. Mortgages that allow offset accounts can incurr higher rates, fees and other charges which can further erode the nominal offset rates.
freckle, offset accounts don't effect loan balances, only interest charges. In most cases offsetting a loan has little or no consequence on tax deductibility apart from if it is being used to offset interest in a tax deductible loan. In this scenario, in most cases, the money can be taken out of the offset fro any purpose without effecting the tax deductibility of that loan. It is very different in this regard to redraw or drawing on an LOC. They can, but often do not, come with higher rates.
Sorry, I should have looked at the title of the thread, not just the post. Chris Smirnakos at Landmark White is very good. If you want a report that will be acceptable to almost any lender then use Charter Keck Kramer, not sure who does their retail property vals.
