Can any financiers tell me their thoughts on this pls:
IF a registered BUILDER (NOT owner builder) buys a block of land under their COMPANY name, of which they are the only Director, then wants to obtain construction funds, to build SPEC HOMES to SELL on that same land……..will the banks view it as an OWNER BUILD?? (And therefore be very difficult to get funding?)
Or, how will the banks assess it??
What is a good way for builders to get loans then please?Have you a track record? Portfolio? Detailed cashflow analysis for the project? Is an overdraft an option?
Banks will see it as owner builder. There are still a few that do owner builders though.
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
I just dont get it, sorry.
This just doesnt sit right with me. I need more info pls.How can builders buy land developments, in their own company's name, and build multi dwellings then,
if banks will only consider it an owner build???
As an owner builder you can only build one dwelling per 3 years, and only then if it's "intention" is to use it as PPOR!
So there must be ways that builders get around this,
to get funding and can build more than 1 property in their business name every 3 years!Can someone pls give me a (few?) scenarios of how builders get around this then???
And yes, there is a track record, detailed analysis,biz plan,financials etc Scott, although I dont see how that will make an iota of difference if banks will only lend as an owner build.
Also………. then if banks view a builder building on their own land to sell for profit, but banks consider it owner building, then what does the ATO consider it as??
I am sure they would view it as "business" and tax it accordingly!It depends on how big the project is. If just a house or duplex etc and you are building it, then you are classed as an owner builder by the bank. This has nothing to do, really, with the council or dept fair trading requirements on owner builders – which probably wouldn't apply if you were a licenced builder anyway. And just because it is classed as an owner builder doesn't mean you cannot get finance.
The ATO stance also is not related. ATO will want a share of the profits if it is an investment. If there is a company owning it or constructing it, then there will be taxes involved. If you are owner occupied and building it yourself, then there may not be.
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
Hmmmm…………. I do hear what you're saying…………I just think there must be another way builders are financing their own projects without it being classified as an "owner build", as the regs for OB is only ONE dwelling every three years! It just doesnt add up. I will pose this qu to the builders on "general" forum and see if any respond. But, thanks anyway!
The one dwelling per 3 years is a Dept Fair Trading rule. Nothing to do with borrowing money. And according to the DFT you will be a licenced builder anyway, so this rule wouldn't apply.
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
Speak to your business banker, not the gumby at the front desk.
This is commercial lending for commercial purposes isn't it? In NSW you don't need a builders licence to build commercial premises – banks understand that and will limit funds based on your financials and ability to repay not some half-@rsed idea that you can owner-build once every three years. I am sure Harry Triguboff never had that problem (he never borrows to build after a blowup with his banker many years ago).If you are just building one house on your block, then there shouldn't be too much of a problem. You can still get finance as a 'owner' builder. If you are going to building big stuff, then this is different. You would be a developer and this would mean different criteria. And I think you would need to be a licenced builder to build anything other than your own home.
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
IP Freely wrote:Speak to your business banker, not the gumby at the front desk.
This is commercial lending for commercial purposes isn't it?I concur with this. This is a situation i have come accross quite a few times, you shouldn'y have an issue if you use a business/commercial banker.
Regards
AlistairHi Misty,
I'm a registered builder in Tassie and have had exactly the same problem. Nearly everyone classed me in with owner builders when I was trying to get finance to build specs.
The only bank we had any luck with was the NAB. That was back in 2004 and we still enjoy a great relationship with them, using them for all our developing.
Best of Luck,
Pete
Your talking commercial products here where a business banker at any bank should be happy to do business with you. This does not fall into the standard mum and dad construction arena.
regards,
mmm- Im not a lic builder, but I buy land, sub, and build a lot of homes, townhouses- depends on your structure and how many you wish to do at once.
Over a certain level you will go to commercial finance- sometimes if a few specs < 5- it is normal residential investment finance, over that we use the commercial construction finance products.
We have dealt a fair bit with Macq, ANZ, St George, and JP Morgan Trust- for building.
Some we keep and rent, others we sell off the plan or on completion.
We have set up a development company for the ones to build and sell, and a holding company for the ones to hold and rent.
Hope this helps a little- make sure you have a very switched on finance broker, that is experienced in these area, and maybe also talk to other builders in your area how they do it.
Never give up!! Im not a builder, but love building, design, finding land, subdividing, and the whole building process- organising structures, finance, spreadsheets, picking tiles, materials, gardens, curtains, blinds, ovens, and building quality homes that people will love to live in and enjoy. I dont do cheap basic specs- also very important – KTICHENS/ BATHROOMS/ COLOUR SCHEMES! BYE
This just doesnt sit right with me. I need more info pls.
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