Hi there,
Just wanted to know peoples thoughts or experiences in relation to development.our situations is that we own a property that can accommodate 3 units. The land is in our name (we don't have alot of equity left) and wondered if starting a company would assist us in developing the property sooner? meaning we can borrow more to develop?
i understand that banks may borrow based on a non residential loan like a business loan in order to complete the development? is there any or many restrictions?
or is it still better to wait… till the market picks up ???
Hi Pinwheel
I can think of numerous issues with this strategy which would include:
1) Unless one of the Directors is a Registered Builder or you intend to Contract the work out to one you are going to be treated as Owner Builders and this may not even be possible depending on which State you are in.
Either way on a financing perspective forget it.2) If you have little equity left now as soon as you knock the house down youa re going to be down to land valuation only.
Might find at this stage the land is worth less than the loan amount. Most traditional lenders do not offer gross Realisation loans so this is an issue.3) Carrying on from 2) above unlikely to get more than say 65% loan to valuation so you will need either to kick in equity or cash to get the project numers to stack up.
Few others but i think you get the point.
Richard Taylor | Australia's leading private lender
Thanks Richard,
In other words wait till we can afford it through winning lotto, savings or substantial equity
we bought in the boom (wrong timing) so now it is a case of waiting!
Cheers
HelenGrrrr sorry to say Helen but Yes.
Of course without all of the numbers it is difficult to be exact but if it is over 80% LVR then no chance.
Richard Taylor | Australia's leading private lender
Two other thoughts – either you can employ a competent person with a builders licence to be your nominated supervisor for your building company or you could just get a builder to do the work (which may make financing easier as it won't be owner-builder).
Still problem comes when the land value is less than the current loan amount and GR lending isnt available.
Richard Taylor | Australia's leading private lender
You must be logged in to reply to this topic. If you don't have an account, you can register here.
