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easy solution, go get a job, doesn't have to be the best job in the word you don't even have to like it, it doesn't even have to pay that well, you don't have to work there forever, just quit after you have your loan approved.
Or tell them you are going to rent the entire property out. Or go to a different smaller lender that will lend based on equity position and not serviceability. Ie a hard money lender.
Once you get a job, then refinance your equity out with a mainstream lender.
and in reality your not borrowing 200k even if you have money in your offset account. Your borrowing 480k. and the repayments will be calulated on that.
id on that you could have single garages on both sides of you house as well.
If you wanted to be financially smart about it.
You could have a building designed that was say… 4 to 5 bedroom with 2 bathroom.
you might select to buy a medium sized block that within council regulations and the development plan could of allowed a semidetached or joint walled property to be built if you.
You have the large 5 bed 2 bath home constructed as a single dwelling
You then qualify for you grant etc etc wait 6 months live it do all the other things they want.
And then because of your brilliantly designed building where you already had a fireproof hallway installed and all the other regulations that would of been need to be approved as a semi detached home.
You then subdivide the property add another water meter to the left or right side . You already allowed with your builder to have a IP point before the 2nd toilet meet up with the first toilets line.
and behold two properties.
just looking at the amount of money that you have. you dont have near enough money to even think about doing a large land subdivision like that.
You would be up for $100,000's of services costs.
Unless you could presell the banks required amount of land blocks before you started the development. That might be all of them. They might want you to presale all of them which could take years if the this couple acre lots are located semi rural to residential.
One normal standard torrens titled subdivision where the sewer water and power are located in the street already can cost between 15-30k depending on the state.
times that by 13-14 lots.
Add on the cost of roads if required. and lamp posts electrical wires perhaps even upgrading the nearest transformer.
Power poles can cost 10-20 k … Per pole
upgrades on transformers 5-7k
then you have crossovers as well.. ask a concreter for that they would be 2-3k a pop per cross over
it would be a very expensive project and not something i would even consider doing with only a expected 110k in equity.
What is your current income?
do you have any family members over 18 earning low wages ?
if you accept that the worse case is the company tax rate is only 30 %. ( is it reducing to 29% for small/medium business this year?)
Yes that is one way to do it.
The smarter way would be to get your plans and building approvals through council first.
Then once you have done that source a few quotes for the building of your 2 units out the back.
Lets say we will use your example of 500k for the units although unless they were double story i would say 250k a unit is a bit over the top.
You then go to a bank that will give you a upfront on completion valuation on what the dwellings and original house will be worth on completion. ie the total net worth of all the dwellings combined and this will be based on like sales for similar houses in the area.
lets say the valuation came back in at 1.2 million – original house 300k, unit 1 450k unit 2 450k.
Lets assume you have a loan on the current property of close to purchase price or 80% whatever you choose say its 400k loan.
Tentative on completion finance allows you to borrow up to 80% (sometimes 90 although rare) of the final value of the project which in this example is 1.2 mil.
Your fixed price build contract with your builder is for 500k and you have a existing loan on the property of 400k. Therefore your total debt is 900k (assuming you did pay planning fees out your own pocket)
the bank will lend you 80% of the final value of 1.2 mil. which is 960k.
So your debt ratio would be 1.2mil/900k = 75%. which would be under the 80% required.
Also is that once you complete the project provided your serviceability will handle it they will forward the remaining balance to you as well so on handover stage you can get a extra 60k in your back pocket as well until you either sell or do something else with it.
if you plan to rent the units the unit rents will be counted towards working out if you can service the debt
if you put some approx figures of your buy price, approx build cost, approx sale/value of the end units and house after losing its land etc could see if your situation adds up
There's no time limit on what qualifies as the time period needed to be deemed PPOR.
I had a friend. Who bought a house so he could live in and renovate whilst living in. His intention was to stay there. About 2 months into living it he had enough of the neighours who regular played loud music and had parties on week nights and he just said iM not living here anymore. He sold made money on the renovation it was exempt because of his intentions. He also had about 4 police inquiry numbers to prove his story
Not sure 100 percent on Perth but your original house do you have to live in it for 6 months to still get the stamp duty concession. If so you have done that. There is no real time limit on how long you have to live in a home before a property is your ppor. But it should be something believable. Ie if you lived there for 1 month and then sold it and claimed PPOR exemption. It might be a bit difficult to believe.
But in terms of records. Changing your drivers licence, voting address, power under your name there are things that indicate its your PPOR.
I don't see why you would max out your borrowing capacity. If you ideally want to keep some of the units you develop. Then make sure what you are developing puts you in a better cashflow position after you have built it.
Ie your current income could service a construction loan to build say 3 2br units. 450k build cost.
If you were to build and keep them all. And rents put you in a negative cashflow position . Lets say selling 2 of those units and putting the proceeds into reducing the debt on the 3rd unit so that it was highly positive . Perhaps with a small debt remaining. Most banks consider 80% of rental income as income. So if this rents for 300 and your expenses (for small loan remaining are 100 a week plus extras) you would have actual positive cashflow of 200 a week . Whilst the banks would consider 80% of 300 – $260 a week, therefore in the eyes of the bank you have actually increased your borrowing capacity by $60 a week which at current interest rates 5.5% lets you borrow more money about 55k more (correct if wrong)
So make decisions that increase your borrowing capacity and not decrease it.
You might have to sell a couple units of your unit development, or even the existing house and 1 unit to keep one unit positive cashflow.
In my opinion. I would now sell your existing house receive your PPOR exemption
go build on the back block. Whilst using you trade skills to perhaps do some of the 2nd fix to keep the costs down if you have the spare time. Living in that property would then give you a PPOR exemption for that property. Then you could either live in a brand new home. Sell the home with no tax, or rent a brand new home with any positive cash-flow being offset my depreciation in the first couple years
I don't think he quoted the end sale price of the new build.
He did say the original house is now hoping for 400k reval.
I do agree that he prob spent at least half of that 50k on the subdivision.
So you paid 380k plus stamp duty
spent say 20-25 on sub and 2same on Reno
you original house now 400k or expected.
land worth 200k and to build is going to cost 160k.
Whats the expected sale price or value of the new dwelling ?
If your land has now a seperate title now at the LTO then you can use it as security for the new dwelling.
As your equity would be 400+200 minus your loan on original house and Reno/sub costs.
How about remortgaged ? Ie property owned for 10 years in smsf and then they start a new non recourse loan with another bank?
If your smsf takes out a loan to purchase property. That property then increases in value. You wont be able to redraw any funds or access any of that equity unless you either sell or refinance with another bank setting up another loan (costly, 2-4k at least)
and yes as you bought the property in your super any equity that property gains belongs to your super.
Cannot cross collateral in superfunds stand-alone loans only
If your good at managing your money. You could achieve the same result by setting up a IO loan with a offset account as paying P&I.
ie If you paid 2000 PI on a property every month. and 1500 was the interest component and 500 was repaying the principal
you could Pay just interest only 1500 and put the other 500 by direct debit into the offset account linked with that loan.
You would pay the same amount of interest in both situations but your availability to cash in your offset x 3 properties could enable you to save for a new property sooner.
Are the properties neutral, positive or negatively geared?
If I said excel spreadsheet I meant each banks individual program (although dated) they use which in its current format loads up in excel.
Coming back to this post from 8 years ago. Nathan I can already see the title for this young investors book.
I think it should mention 100 properties and 30 years old.
even if you rent or live with parents you still live in 1 home.
Ok yes i prob should of added in that I DONT RECOMMEND that for beginners.
Ill just add that for the top part of most of the spreadsheets.
most people live in 1 home
and have 1 ppor
and if you click on the negative gearing tab to take you into were you can determine if you own properties 50 :50. tennants in common, putting 99% of the gearing on the highest income earner and 1% on your partner etc.
Personal loans even if used to 100% wont be counted as negative gearing
neither credit cards or car loans. so tick NO for those boxes
I have 2007 ones that i have compared at Nab westpac and cba that they are still 99% the same. The only difference with cbas and nabs new calculator is they have more data slots to enter in available loans. Ie i think they only have about 10 in this one but in thier ones they have 20 or so. So you can imagine once you get a credit card a car loan couple home loans you run out of space but you can always group similar debt ie all home loans at 5.5% into one big loan so you have enough space
couple quick rules to remember if you self calculating is even though they are the exact ones used.
You still have to remember that banks will add 2% buffer to any new debt you wish to add. So when working out if you can afford it work on 2% interest higher then standard (ie 7.5% instead of 5.5% even if your loan will be for 5.5%) for any new debt
You have to get your dependents right on the calculator if you have kids add it in. Some changes have occurred with dependents but i have doubled checked this across their new calulators using the new standard of livings.
Overall i would say they are most useful as a very close guide. You could use them to figure out ballpark figures to within 10k-50k borrowing capacity. ( mine are usually spot on, the last 5 houses i have bought i bought without subject to finance because i knew without going to a broker/bank that i was within my borrowing capacity once i add the rent etc)
Self employed income is in another tab. remember you could get add backs etc
there will be a LVR debt % serviceability somewhere on the page.
if your below 50% usually the loan will be approved straight away.
above 50-65% gets referred to credit etc
over 65% gets declined or you'll need direct approval from someone higher up. and will be situational dependent. things like you have bridging finance, contractors paid in lump sums.
finally use them as a guide only to plan or map out how a individual property would or could fit into your portfolio and thus work out a financial plan or even to goal set.
ill email them out now
If you send me a PM with your email i can send excel files for every major bank that calculate serviceability both payg and self employed. It has been so valuable to me being able to determine if i can afford something before i make offers.
Its also useful in putting in different scenarios. ie changing rents etc (i don't think im suppose to have it, but somehow ended up with it)
