Hey all,
myself and 2-3 friends are considering forming a property development syndicate, ie, pool cash and resources increasing our serviceability and deposit.
The intention is to start out in small multi unit developments and moving north(hopefully) from there. Selling some units for cash flow and retaining some property long term for Capital growth and returns.
Hopefully someone can offer advice on the following: I will be seeking professional advice but am looking for a starting point
What is the best setup, as there is only a few of us would we better to have a legal agreement binding our commitment or would there be advantages(tax or other) to creating a trust or even registering as a business? Probably mainly concerning going to banks for finance(will they want to see 3 separate people on an application?)
Can anyone recommend any books that are geared towards such a strategy?
final query: perhaps the resident mortgage brokers can help with this one….
At this stage, 3 guys initial deposit of $25k each total being $75k, earning around $65k/yr each in pretty secure jobs.
with that very brief information, what level($) of finance would we be able to secure from mainstream lenders(e.g. CBA or NAB etc) for our first project? on an LVR of 90% is there anyway to avoid paying LMI?If you have read this far thankyou!
Any advice would be appreciated, better yet…. if someone would be available to mentor it would be fantastic!!Thanks in advance.
Mick
Hi Mick
Regretfully no way of avoid LMI on a 90% lend with a traditional style lender and more importantly will they even fund the deal irrepespective of the LVR.
You would probably look to use either a Unit Trust with a Corporate Trustee or a DFT with same.
3 out of the big 4 Banks will not lend to Unit Trusts so they are out of you use that structure however could certainly be the easiest to manage and most constructive when it comes to flexibility.
When you mention multi unit dwellings i am assuming you are referring to more than 2 and that could be your next problem. If you are looking at construction then you maybe limited to circa 66% – 70% lvr or if you are looking at buying them whole maybe 70% – 75%. Again not a domain of the Big 4 lenders.
Richard Taylor | Australia's leading private lender
Richard,
Thanks for the reply! really helpful.
Just to confirm that I am understanding you correctly,
Basically with a $75k deposit, possible finance would be around 300k for purchase of pre-built block of units and slightly less if getting finance for construction? all of which would be with smaller lenders? im guessing that on such an LVR no LMI would be required?
I was looking at a 4-plex a while ago that was a little older and was told that the 4 big players would be able to finance the deal(but usually they limited finance on those deals to blocks of 4 units or less – on the one title). is this still the case? or would you get a better deal through a finance company that specialised in such a purchase?
Richard, would you be able to recommend a lender that you have dealt with and would recommend, so that I can look at their products?
$300k for a development isnt much but there is definitely room to increase that initial deposit amount. We all have to start somewhere I guess.
Thanks again for your advice
Mick
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