Peter specialised area but we do a lot of development finance.

In fact we do so much we even created our own Pooled Mortgage Fund which has just under 500M FUM.

Cheers

Yours in Finance

Hi Dean

Welcome to the forum and i hope you enjoy your time with us.

Many other considerations other than just the deposit split but yes subject to the lender you would be able to access > 20% from the equity in your own home. Apart from structure and maximising the interest deductions you also need to think about whether this purchase is a one off or subject to income whether you intend to create a portfolio.

A good investment orientated broker could certainly give you some lending options in order to maximise your $$,

I can certainly send you link to a article i wrote for the API Magazine some years back now on how i structured my portfolio when i started acuiring my first few properties.

Cheers

Yours in Finance

Hi, there welcome to the forum.

Hope this helps.

What are the rules for non-residents buying property in Australia?
Australia’s buoyant residential property market, economic stability, natural beauty and favourable climate have made it an attractive destination for international real estate investors.

However, the rules for non-residents buying property in Australia are complex and subject to regular changes. This can make the process of applying for approval to buy an investment property extremely difficult for foreigners to understand. On top of that, there are stiff penalties for breaches of the foreign investment rules.

A key consideration when buying real estate in Australia is that non-residents must buy new properties or vacant land on which a new development is planned. The Australian Government has implemented this policy as it wants non-resident investors to add to the Australian housing stock rather than compete with residents for existing properties, which are in short supply in some areas. It also wants to avoid foreigners contributing to property price rises through speculative investment. However, there are some exceptions to this rule.

We aim to provide non-residents with all the information they need to understand the rules for buying a residential property in Australia.

Foreign Investment Review Board (FIRB) rules
The authority on non-resident property purchases in Australia is the Foreign Investment Review Board (FIRB). Any non-resident wanting to buy a residential house, apartment or block of land in Australia must satisfy the rules laid out by the FIRB.

Anyone non-resident or temporary resident who buys real estate in Australia without FIRB approval could be subject to a fine up to AUD$157,500 and three years in prison. Any real estate agents involved in breaches of the FIRB rules also face penalties.

What kinds of property can non-residents buy in Australia?
The FIRB rules restrict the types of property that non-residents can buy. Since December 2015, non-residents may only buy new residential property, established dwellings for redevelopment or vacant blocks of land for development.

Buying a new dwelling as a non-resident of Australia
The FIRB defines a new dwelling as one that has been built or is under construction and: has not been previously sold as a dwelling; and either:
has not been previously occupied; or if the dwelling is contained in a development and the dwelling was sold by the developer of the development has not been previously occupied for more than 12 months in total.

New dwellings do not include established dwellings that have been renovated or refurbished.

Annual vacancy charge
The FIRB rules stipulate that a non-resident who buys an Australian residential property but does not live in it or rent it out for at least six months of every year will be subject to an annual vacancy charge. The amount of the charge is determined by the Australian Taxation Office (ATO) when non-resident owners of Australian real estate lodge their annual vacancy fee returns.

Paying tax on investment property in Australia
If you buy an investment property in Australia, you must declare the income that is received by lodging an Australian tax return. The costs of maintenance of the property can be claimed as a tax deduction.

If the value of the property increases while you own it, you may also have to pay capital gains tax (CGT) when you sell it.

Buying an established dwelling for redevelopment in Australia
The key point to consider in relation to the redevelopment of an established dwelling is whether the completed development will increase the Australian housing stock. The FIRB generally takes this to mean that at least one additional dwelling has been created i.e. a single dwelling cannot be redeveloped into another single dwelling. Other conditions for the redevelopment of existing dwellings include:

The existing dwelling(s) must remain vacant prior to demolition and redevelopment;
The existing dwelling(s) is demolished and construction of the new dwelling is completed within four years of the date of approval; and
Evidence of completed of the dwellings is submitted within 30 days of being received by the applicant. This could include a final occupancy or builder’s completion certification.
Buying vacant land as a non-resident of Australia
Non-residents may buy vacant land for development after seeking FIRB approval. They must also meet certain conditions around the development of the land such as completing construction of a residential dwelling within four years of the date of approval and provide proof that the dwelling has been completed within 30 days.

Vacant land that has previously had an established dwelling on it would not be considered as vacant land by the FIRB.

What types of property can temporary residents buy in Australia?
The FIRB defines a temporary resident as an individual who:

Holds a temporary visa that permits them to remain in Australia for a continuous period of more than 12 months (regardless of how long remains on the visa); or
Is residing in Australia, has submitted an application for a permanent visa and holds a bridging visa which permits them to stay in Australia until that application has been finalised.
Foreigners on a temporary visa, including a spouse visa or a 457 visa, are allowed to purchase a single established dwelling or new dwelling in which to live during their time in Australia, once they receive FIRB approval. Alternatively, they can purchase a vacant block of land if they plan to construct a dwelling in which to live. In addition to the condition that the temporary resident must use the property as their principal residence while in Australia, they must:

Not rent any part of the property, including ensuring that the property is vacant at settlement; and
Sell the property within three months from when it ceases to be their principal place of residence. If permanent residency is obtained the property does not have to be sold.
Can temporary residents buy investment properties in Australia?
In addition to purchasing a property in which to live, temporary residents of Australia may buy an unlimited number of new properties for investment purposes dependent upon FIRB approval for each development.

Foreign Investment Review Board exemptions
Certain individuals and types of property are exempt from the requirement to seek FIRB approval. Anyone who is in doubt about their eligibility for an exemption from FIRB approval should seek legal advice as harsh penalties apply for breaches of the FIRB rules.

Exempt persons
Australian citizens
New Zealand citizens
Holders of Australian permanent visas
Foreigners buying property as joint tenants with their Australian citizen spouse, New Zealand citizen spouse, or Australian permanent resident spouse.
Exempt residential real estate
Certain categories of residential real estate in Australia are exempt from FIRB rules including:

New or near-new dwellings purchased from a developer that holds a new or near-new dwelling exemption certificate that allows the developer to sell dwellings in the specified development to foreign persons.
An aged care facility, retirement village or certain student accommodation, provided the interest is not above the relevant threshold.
A timeshare scheme where the foreign person’s total entitlement (including any associates) to access the land is no more than four weeks in any year.
Those acquired directly from the Commonwealth, a state, a territory, or local governing body.
Australian banks and foreign lenders
There has been a move towards non-bank lending in Australia from non-residents in recent years as the large established banks have become less accommodating to non-resident loan applicants. Some have ceased non-resident mortgages entirely, while others have lowered their loan-to-value ratio (LVR) (the loan amount divided by the value of the property) for foreigners to around 60%.

The LVR is the figure used by lenders to determine the level of risk of a borrower. A high LVR means that the borrower represents a higher level of risk.

For example, if you wish to purchase an $800,000 property and have a $160,000 deposit saved, you will need to borrow $640,000. At 0.8 of the property’s value, this would be an LVR of 80%.

In this example, a bank with a maximum LVR of 60% for foreigners would require a deposit of $320,000 on the same $800,000 property.

When to apply for FIRB approval
Non-residents must seek FIRB approval before they take an interest in any Australian residential property. Under the FIRB rules, an interest can include, but is not limited to:

signing an unconditional contract agreeing to purchase a dwelling or share in a dwelling.
a security interest under a real property mortgage, even if the person that possesses the property is an Australian citizen or permanent resident.
an option that provides the right to purchase a property at an agreed price at some time in the future.
a leasehold agreement that is reasonably likely, at the time the interest in the agreement is acquired, to exceed five years.
increasing the share of ownership of a dwelling that the foreign person already has an interest in.
What happens if you receive FIRB approval but change your mind?
If FIRB approval is granted and the sale of a property does not go ahead, the potential buyer must notify the FIRB of the circumstances.

We deal with a lot of Non-residents both on the finance side / Joint ventures so feel free to shoot me an email if you want any additional information.

Cheers

Yours in Finance

Hi Wan

Yes it makes sense assuming you dont require access to the cash funds.

You could always do say 100K interest only with 100K in the offset and a secondary loan split for the rest.

In saying that CBA would have to be one of the least attractive lender for such a strategy.

We do a lot of debt recycling for clients and would never use CBA for a variety of reasons.

Cheers

Yours in Finance

Hi Dandare

I am sorry i dont agree that their is any can of worms to open up.

David has replied to your post so why not hit him up and get him to run some servicing numbers for you with both your current lender and others.

A better deal could be round the corner and your existing lender is not going to shout out and tell you.

Cheers

Yours in Finance

Hi Tinpot

So to clarify you have the costs to acquire the site (stamp duty etc) and cover the subdivision costs but require 90% of the purchase price ?

What other security are you offering i.e 2RM on your own property etc.

Cheers

Yours in Finance

No not true on that combined income.

Cheers

Yours in Finance

As i mentioned you will need to look regularly at the various Receivers website.

Cheers

Yours in Finance

As a Private Lender we sell a number of properties thru Sheriff Auctions or Receivership sales.

All Sales are sold by way of Auction so being a cash buyer wont help you as all contracts at Auction are cash sales.

Rather than buy the property itself you could always look to assign the mortgage and that way you take over the debt and can maximise returns by evicting the borrower / tenant and in the interim charge the applicable default interest rate.

We assign a number of mortgages where we would rather take our principal and standard interest now rather than go thru the eviction process and increase our returns.

Cheers

Yours in Finance