G'day…
I own 2 investment properties with my partner and have just been offered a 3000m2 block of land to be subdivided from my parents original 10 acre block. My brother and sister have also been offered a similar size block, however, they have no idea how best to handle this generous offer from the pears. They are both on low incomes and are worried about committing to mortgages and struggling with repayments. I'm encouraging them to hold onto the land and build as opposed to selling the land for a quick profit. The land is only 10km from Hobart city and blocks half their sizes have sold for over $150,000.
My advice has been to look at applying for a construction loan to minimise repayments at this stage. Is this a good option? As all three of us would be building could we organise quotes and contracts at a discounted rate? The land has been given as a gift so the only expenses would be getting the essentials set up (power, water, seweage) to the block and going from there. Has anyone got some good advice for us? Cheers
tuggerwaughIf you and your brother and sister have been offered blocks of land from your parents I take it that you are not buying from them and therefore dont understand what you mean about taking on mortgages are you saying that the blocks are not gratis and come along with debt ?
bardon wrote:If you and your brother and sister have been offered blocks of land from your parents I take it that you are not buying from them and therefore dont understand what you mean about taking on mortgages are you saying that the blocks are not gratis and come along with debt ?
Yes they are gifts, but would have to take on mortgages in order to build on…. land comes with no debts.
Tugger
How much would it cost to build on them? They could get a pre-approval for a building loan, go get plans drawn up and find a builder etc. They should be able to borrow about 80% of the value of the land and the construction cost and this should be plenty. They would only need to pay interest on the amounts as they are drawn down.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
G'day Terry…… good advice from you as always…
With drawing down these lump sums for construction I'm under the assumption that the bank or lending agency have a say in when these sums are handed out and need to inspect the property in stages as its developed. Can this hold up construction or are they normally pretty good with getting out and forwarding the next amount of money? Would you also need to give the banks a detailed run down or construction times in order to have $$ available when needed? cheers
tuggerwaughThe lenders will release funds to the builder in about 3 or 4 stages as building progresses (eg slab down, lock up stage etc). They will need to send a valuer out to check the work has been completed etc. So there is usually another few hundred dollars in fees associated with construction loans.
To approve the construction loan they will generally need a fixed price building contract with a registered builder. There are a few lenders that will lend to owner builders and they require detaile cotsings of materials used etc. (I can send you a spreadsheet from one of the lenders if you like). They give this to their valuer who assesses the value and estimates the value on completion.
The lender doesn't really need a accurate timetable of construction. You just ring or fax them when the relevant stage has been reached and they order the valuer. The inspection is done and money released a few days later.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
G'day Terry…
Thats pretty much answered all the questions I was after… Now to look for quotes to build….that should be the fun stage. Yeah would love a spreadsheet from one of the lenders you have that would be great. Cheers terry
chris
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