Hi,
We have found a property with 32 square double storey 4bed + study house in melbourne with total land area 2176 sqm. It has really big backyard. Property is in 4 minute walk to train station, big shopping centre is in the back yard, and property is next to the kids park. Existing house is in excellent condition, plus it has plans and permit approved for 4 new double storey 22 squares each town house in the backyard i.e. 4 + 1 existing = total 5 houses.
We also, went to council and they were surprised that the vendow had only applied for 4 units where as they could have got more units in that land. Land size 2176 sqm is huge and hence we are applying for permit for 6 units.
Now, here comes the issue. We applied to CBA and other banks, they have given approval for 95% LVR subjected to valuation. Hence valuer went there for valuation, now he is not prepared to value it as residential, he is classifying it as a commercial property even though we are not planning to build anything for atleast a year. At this stage we are only looking for buying this house and big land. But valuer is not giving residential valuation. Hence, bank has declined the residential loan and they are happy to take it as commercial loan but it will have higher interest rate and cost for the valuation and application fees all together it adds up $5K and most of all it can only lend max 70%. We do not have 30% for the deposit and we do not want to let this prop go because it is under valued by at least $100k.
Hence, I was wondering if from your experience, someone can give us any idea on what can be done about this issue. or purhaps or last resort would be to go as commercial loan then issue is for 30% deposit. Max deposit we have is 10% hence we will have to look for the partner. Hence, first we will try to explore other options and other we are happy to consider partnership if anyone is interested. Property is in prime location and under valued. The reason why I am saying under value is because before getting involved in negotiation we have done valuation report from the independent certified valuer for the property. And the price we are paying is almost $100K lower then his very very conservative valuation in this current market.
any help will great.
regards,
DM
Digit, the property is a development site and is required to be valued by a valuer as such, taking into consideration the highest and best use of the property.
As a matter of interest, what did the banks valuer come back at? Was it similar to the value that your valuer came back with? Did your valuer assess the site in its current form, zoning and at its H&BU or based on the current DA? (if it is the latter, it may pay to get the valuer to revise the valuation to reflect the H&BU).
Hi, can this be done?
Buy it as a residential property [house and land] I'd go through another lender.
Then with all the permits etc, apply for construction loan. The construction loan will most likely be classified as a business loan. Fees are appreciably higher but interest is charged only when building costs build up.
If you can't manage the holding costs, be very vary. It might be that you're position can be precarious.
Good luck,
KYDM
Probably need to no more about the deal but have done several deals like this previously with no problems.
As i say more information needed first.
Richard Taylor | Australia's leading private lender
Scott No Mates wrote:Digit, the property is a development site and is required to be valued by a valuer as such, taking into consideration the highest and best use of the property.As a matter of interest, what did the banks valuer come back at? Was it similar to the value that your valuer came back with? Did your valuer assess the site in its current form, zoning and at its H&BU or based on the current DA? (if it is the latter, it may pay to get the valuer to revise the valuation to reflect the H&BU).
Scott, thanks for the reply.
Bank valuer didn't give any figure, he is not prepared to give any value if application is for residential loan, he said to bank that get it under commercial loan application and then we will value accordingly. Our valuer did value on its CURRENT form i.e. Existing house + extra land in backyard + $25K for the value of the permit for 4 extra units. Hence it is based on current form , zoning etc.. He is/was not aware that we are applying for new permit/DA for 6 extra units.kum yin lau wrote:Hi, can this be done?Buy it as a residential property [house and land] I'd go through another lender.
Then with all the permits etc, apply for construction loan. The construction loan will most likely be classified as a business loan. Fees are appreciably higher but interest is charged only when building costs build up.
If you can't manage the holding costs, be very vary. It might be that you're position can be precarious.
Good luck,
KYThank KY,
That is what we are trying to do i.e. at present buy house and big backyard as it is as normal residential loan, and then rent house existing house (rental would be $400pw).Then later on once we get new permit approved for 6 new units then we will worry about getting construction loan.
We have done numbers based on 6.5% fixed rate for 10 years, there will be negative cashflow to hold this prop, however we are happy and comfortable to have this negative cashflow. Also, for construction we are prepared to go for commercial loan and it will ok at 70% because at that time we will ask for re-valuation and get a topup which would be used in construction.
Hence, at this stage construction cost is not issue, main issue is to get this house + land settle. Another thing is we have penty of time because settlement is at the end of August. hence, by that time out permit/DA will be sort out as well, hopefully.
Qlds007 wrote:DMProbably need to no more about the deal but have done several deals like this previously with no problems.
As i say more information needed first.
Thanks Richard,
Please PM me with information you require and I will revert back with the info.
regards,
hi digit, good to hear you're able to buy it 1st and just mosey along with the holding costs as -ve gearing.
I did one [my 1st ever subdivision] like that.
The property was quite horrendous [hence the low price] but the lenders classified it commercial. I went ahead & bought it knocking off another tenK. Holding costs were very high in my case but I could manage as I had no debt.
Once the approvals were all done, CBA gave me a 75% loan on END VALUE which was enough to cover all costs and more.
So if you do your sums based on even 4 townhouses, your end value will still be high enough to give you what you need.
Good luck,
KYJust be careful if you go to another lender, that they don't use the same valuer in that post code.
Any valuer worth his/her salt must value the property in accordance with the valuation principles set out by the API (if they are a member, most are). That means, they must review the zoning of the land and establish the highest and best use, even if they know the property is being sold as a development site.
Go back to your original valuer, advise that they may have missed something on the block as you 'believe the zoning allows units' hence they can lend weight to the argument that the block is worth more. Present that valuation to the bank.
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