I have contracted to purchase some Investment/Development property and have had difficulty in getting sufficient finance.
I would like to maximise the borrowings, so that I have enough readies to develop this and other properties that I own.
My Current Situation:
I have a Company, and I work as an IT Contractor. The business has other income (IT Sales and website development). As with other self employed people I am able to claim expenses against my company that would normally be paid privately. This reduces our taxable income, and our private expenses.
Last year's taxable income was low due to a gap in contracts. I am awaiting renewal of my current contract.
I have an existing Portfolio Loan over some of my investment property. My current estimated retail value of that property is $830,000 and the facility is $525,000 with outstanding debt is abt $345,000.
This consists of 3 rental properties returning $615/week, plus 1 house block.
I have unsecured land with est value $375,000. This land 3/4 acre in the main street on 4 titles classified as Local Centre(commercial).
I would like to put a transportable on the residential land, to rent at $200/week.
I would like to subdivide the Local Centre land into 400sqm lots to sell for abt $700,000 total.
The New Purchase:
The new property is $286,000 and consists of;
1 x 1/4 acre Local Centre block in the main street with a historic shed. Possibility of subdivision to 2 x Local Centre blocks. Est current value $100,000, more if subdivided.
1 x 1/4 acre with 3br transportable which needs a claenup, will rent for $200/week +.
1 x 1/4 acre vacant residential block overlooking river which requires survey and lodgement of right-of-way to the next block. Current est value $100,000.
1 x 1/4 acre residential block with old 2 room cottage on river's edge. Access has been washed away by river erosion and requires access via previous block. Est value $75,000.
these residential lots are on an unmade council road, which will require some work.
The Finance Offer:The broker was only able to negotiate $165,000 Interest Only Portfoilio Loan on the above proverty (as a low doc), based on our ability to pay.
I was hoping to add my unsecured Local Centre properties to the new property to borrow the total purchase price, and more if possible. I don't mind putting the whole lot into one facility. I want flexibility to enable me to develop the potential of the properties.
My goal is to own at least 5 rental properties debt free, paid by the sale of the Local Centre land.
Any ideas?
Try to get some unsecured finance under your company name, yes you will pay a slightly higher interest rate but it will free up some equity from your property,….. even if it is only $10k of $20K unsecured every little bit helps,…. most lenders will probally lend up to $50,000 unsecured if you can convince them your business is doing well,
A lender will lend money to your company when you take away all the reasons they can say no for.
To maximise the amount a lender will lend to you,…
– Always Declare every cent of income you recieve,….. In business it is tempting to not declare some "cash" jobs, but for the sake of a bit more spending money you are losing alot of borrowing power because if the income is not on the books then it doesn't exist.
– Don't go over board will claiming deductions that you have used for personal use against the business,…. It might seem like a good idea to claim as much car use, house hold products and other stuff you use through the business so you pay less tax but when the lender looks at your tax return it will look like you are making less money than you really are so they won't lend you as much and your growth will be slowed,
– Write up a business plan for the lender,….. Outline how you plan to grow the business, where you will increase cash flow, how you will be mitigateing business risks, your business stengths, etc.
– keep up to date profit and loss and graph your turn over,….. have visual charts showing your business growing and keep a profit and loss to show your business plan is working month by month,…
It appears there is plenty of equity for an equity only loan.
I would suggest a staged finance approach to your plan spreading the lending. You may find if you are using one lender such as St George you will be capped not only by income, and security but also with to total loan amount expecially under low doc
Does your company have gst registered.
CraigYes, it is GST registered.
The capping seems to be based on affordability, and financier wouldn't take the usual deductions (negative gearing) etc into account.Gross income including rentals (after purchase) would be at least $120,000, but company deductions reduces this a fair bit.
Sorry that seems silly the whole concept of the low doc is to take away the need for a lender to intepret figures by simply making an income statement . Naturally from an affordability factor you will need to be able to afford this as the onus is taken away from the lender, which is why you are generaly signing a statement which specifically requires you (or your company) to declare you can afford the loan. Happy to help
Craig
Hi George,
There are fantastic products on the market that can take you to 80%LVR's and even products that you can then capitalize part of the interest which will give cash flow.
Based on what you have disclosed then there are lenders available that with restructing your loans could even offer you more.
Sharlene
[email protected]Rather than go to the expense of refinancing especially a SGB loan look at the alternatives with either lodoc 2nd mortgages or utilising the unincumbered land as security.
Whilst you may a little more for a lodoc / nodoc 2nd mortgage it will only be on a small part of the overall loan amount.
Richard Taylor | Australia's leading private lender
Hi George et al
There are finance groups out there that can offer you assistance in your situation. You appear to have plenty of equity and a sound plan for development of your assets.
Have you considered development finance.
If you would like more info on a portfolio approach to development, I have a contact who specialises in this area through Xplore Finance.
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