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Hi Cliff
You might find it difficult to get rid of your personal guarantee over a small development, Unless you can get your loan to value ratio down on the whole project. I.e. down to 50-60% as a limited recourse or non recourse loan.
But if you are up above that you might just have to suck it up and signWhitehorse tend to be a bit on the expensive side. But if it’s your first time and you are completely green, worth spending the money. Otherwise just break it down into the sole operators or small business as their over heads are less and therefore prices being a bit more competitive.
And I would just ask their hourly rates. And don’t be Afraid they will be 70-100 per hour for a drafter,
150-250 for a planner (depending on their experience)
Arcs – 50-200 a hour really depends on experience
Surveyors – ask how much they would charge for a 1 into 2 lot subdivison. Specify if you want a torrens title or community1) get the actual bank valuation – around 500k is only a starting point. You need certainties
2) from there equity Available without selling the investment property around $157k
3) where do you live if if you have a rental property and then a block of land. / additional funds might be there
4) incomes would have to be sufficient to support the loan/s unless equity requirements can be met and full debt coverage- which means presales. 2 homes sold would cover the cost of construction
5) list your expected current value of the land – as that is important to work out if you actually have equity there also list your current incomes of all parties involved. If your total incomes are under 50k a year you might not have a good chance of securing loans except through presales and full debt coverage.
6) 3 homes is good would come under residential lending at 80% LVR.
7) town planner advised to actually determine if you can get 3 on the block, with perhaps a drafts person for a quick sketch of basic site plan to take to council to get there advice.Kind of how you used to have low doc loans where you just signed a stat dec or had a letter from your account saying xyz He earnt 200k a year and could therefore service the loan.
If the income from the properties is cashflow positive (in the eyes of the bank this would mean that 80 % of the rent covers your repayments) then each property would increase your borrowing capacity.
So you could purchase one property 1 in trust 1 and then property 2 in trust
2 and property 3 in trust 3. So long as servicing was met (and equity).
But your original post is wrong and Steve’s book is outdated.
Back then some banks only asked you to list what “loans” you had personally and not what “garuntees for 3rd party entities” you had given out. If they didn’t ask you to declare it on the form, then some people
Didn’t.I suppose that depends on how much, considerable it is for you. The size of your inheritance. If it was a decent amount, your should change your focus from working to investing that money.
Firstly I would question have you bought any property at all period?
Secondly commercial lending is at a lower LVR typically then what’s available to residential 70% compared to – (80-95 with LMI)
There is also a lot more in depth legal advice you would have to do regarding your commercial leases.
Whilst outgoings might be covered. If a large Tennant was to leave your risk (whilst insurance can minimise some, if it is rent default) might be higher then with residential.
Its a lot easier to sell or rent residential homes then commercial tenancies.What state are you investing in or seeking to invest in?
What area of commercial property are you looking to invest in.
Retail, industrial, warehouses, storage,
Personally I would go for the storage option. You purchase large amounts of land with storage facilities, houses are getting smaller, people have more junk, they will want access to their junk 24/7. You can also choose to run the business or let others lease it off you. And you retain future value should that area become ripe for development.If you haven’t bought anything before. I would be buying residential and low value. Until you are sure you can identity value and know you are not paying too much.
Whilst in a 200k house or unit if you made a mistake you might pay 10kIf you make the same mistake with a 2 mil commercial property. 100k of lost value won’t be much fun.
Some banks don’t like 2nd mortgages. It’ll be that you are taking a line of credit out with anz and then use that money to find the deposit, with the remaining finance coming from NAB.
CBA are one of the banks that will go 2nd in line on a mortgage. Most banks policy is to be 1st and 1st only.
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This reply was modified 9 years, 10 months ago by
wilko1.
I wouldn’t say there is a abundance of cashflow positive properties in metro areas. Certainly the exist. Most larger commercial buildings would be, units can be, houses rented out by room can be. Houses with granny flats, houses which you might do a quick renovation on to bump the rent can be, subdivisons where you buy house and sell land or build and sell paying paying off the debt.
But you have to know your sums.Expected rental –
Mortgage
Rental management cost. (The full cost not just the weekly %)
Land tax (if applicable)
Rates
Water (sewage charges)
A vacancy period % (2-3 weeks at least)
And a maintenance budget 2 weeks rent at least.And then adding back depreciation if applicable
Wow
My partner works in insurance and I think I might be sending a link to see if that clause is in building warranty polices.
That is not a good result. What have you done since? Or planning to do
Btw those bad scenarios
– can’t settle, you just did the guy a favor and fixed up his house for him
– not finished the renovation and the valuer comes out because you are trying to
Borrow 95% with LMI, so they always request to come into the property . Meanwhile you haven’t finished and you have no kitchen and no bathroom—- valuation will come back at land value and you could be up for potentially 100s thousands to settle.
– owner dies on you. (Happens more often then you think, happened to me personally as well). Can stuff your plans up if your conditions are not water tight.
– safer to borrow at 80%, then often the bank will do a desktop (on the computer) Val or a “driveby” and not enter the property . If you haven’t finished the Reno. Make sure you PUT BLINDS up. So the valuer cannot see in. Use some
Common sense.
– early access and the owners stuff is still in their. Make sure you have it that they have to
Give the vacant possession by say 2-4 days after you get your early access.
– owner comes over (cause they still have a key) to see what you are up to . (Also happened to me, a old guy I didn’t know let himself into the locked house whilst I was working) now I don’t know him. But what If my tools had gone missing. It could get ugly.Make sure that early access condition is water tight in the contract. A lot of bad scenarios can arise from early access, often they don’t but if they do you want to make sure you are protected by your contract special clauses conditions.
Short answer is no, renovations done before a tenancy will be treated as capital. Must then apply depreciation. But your depreciation would be a bit higher now due to the work on the property. Ie your high value items like stoves etc, faster rates of depreciation.
Make sure you get a quantity survey. (BMT are the bigger player) specify you want a scrapping report. Which can bring instant tax write offs.The ato don’t provide sufficient information to answer if there is a minimum rental period before some
Items could be classed as maintenance(replacing like for like or like for equivalent. Ie you rent for one month then come back in. If you replaced a cracked shower screen(old shower screens with the wire mesh for example) with a new shower (safety glass) that would be maintenance.Brand new kitchen is capital.
Fix the existing stove – maintenance
Gardening – maintenance
Etc.
Look if up if you want to see more examples of maintenance vs capital.Note that if you do sell. Your capital cost for your house would be higher.
Ie you buy at 200k
Stamp 10k
Reno 20kYour capital cost is now 230k.
So if you sell years later for 300k only 70k capital gain.
Max $1000-$1500 for a full report. Some advice you might be able to get for free
Just look at where your crossovers are going to be for the new dwellings / one that faces the bus stop. If they are already existing crossover at the front. Design your house to suit that cross over. If not you don’t have to hire a traffic consultant . But just have him review the minimum distance as required in the Australia Standards for distances from bus stop.
For example stobie poles is 1 metre.
Street trees is 1-2m (but can be council dependent)
Corners. 6m from the apex of the corner.-
This reply was modified 10 years ago by wilko1.
How about which banks are more considerate then others when it comes to accepting different gst figures then a standard 10 percent.
Ie when calculating their in one line net of gst approach.
Say 1.7 mil end value. They go take off 10 percent – 170k. This is a bit cut and dry over the top in my opinion and is more then the gst which would be applicable under a margin scheme approach. Where the build gst is a least discounted off the 170k gst (say build contract inclusive of gst = 900k / therefore gst = 81k ish).
Couldn’t your account prove in a letter or doesn’t your build contract prove that their is a portion you would at least claim back as gst credits.This would add a additional 80-90k back Into the transaction before taking off profit percentage and calculating Loan at 65-70% on that figure.
Finance
Residential vs commercial lending.No point looking at anything if the purchaser is not utterly understanding of HOW much they can borrow, HOW much equity or cash they have and HOW much they need to fund deposits, keep LVR’s in check, hard and soft costs. Ultimately that determines where and what type of development they should look for and subsequently what council areas are within their price brackets and have profitable development polices that allow “developers” to capitalize on those Development Plans.
I don’t mind buying carparks.
As long as your buying the entire carpark.
But no a single carpark for a investment. Poor choice in my opinion. A limited recourse loan and 100k would get you into a 300-400k property easily, which would be a better investment.
No credit history either? (No bad credit history?) I would think nab personal loan 12.99 percent for 7 years could get you pretty high. Limited to 55k. You could prob get 30/40k with a same day approval. Valid reason May or may not be family emergency.
Please feel free to disclose said address. If you want people to do what you say and check.
1, 924,000
– costs of 1,380,000
= 544k gross profit
544,000/1,380,000
= 0.394 x 100 = 39.4 % ( and he said approx 40%)His gross return profit calcs are fine. I think you need to change the batteries in your calculator.
And why would he post the address online. If you wanted to know badly a PM would suffice and if you really wanted to know you could search sold prices for the price he said it sold for, and with the sqm size.He is correct. If you withdrew 200k from your investment property and it’s used it for personal purposes. Then it cannot be seen as a tax deduction.
If you withdrew 200k and used it to pay for the deposit and stamp duty of another investment property then it is tax deductible.
This is why, offset accounts can be beneficial then paying off principle and interest sometimes.
Another idea would be to move into your investment property for a while withdraw the money whilst that is your PPOR. And pay down your old PPOR (now investment property). Then just move back into your old home.
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This reply was modified 9 years, 10 months ago by
