Hi,
I posted this in another forum but haven't had any response so i thought I would post here.
I am looking at a block of 6 units (5×1 bed and 1×2 bed) in Nth QLD which are already strata titled. The asking price is $859,000. The units will require a significant cosmetic upgrade but are structurally sound. I am keen to renovate and sell. I spoke to a business banker today about finance he requires an 80% LVR which straight away makes the deal a no go for me. They are currently rented for an average of $180pw. Likley sale price once the project is completed is $200K for 1 bed and $240K for 2 bed.
Combined income is $178K pa ($82K and $96K). Our PPOR was purchased in Jan for $630K, current loan value is $504K.
Is there anyway to make this work. One thought I did have is as they are already strata titled that my wife and I could potentially purchase 3 each in our own names and thus get access to residential finance at 90% LVR…
Hi J.W,
80% for this type of lend is actually not too bad.
There is quite a lot of concentration risk for the bank with all the properties being on the same block (despite being on seperate titles).
The highest I have given out for this type of property is 85%, but it was to long term clients with a proven track record of successful projects.
90% lvr would be doable as i think i posted on the other part of the forum if you purchased them individually but of course the vendor has to agree to mix up the contracts.
Secondly you would need to both be able to support the individual borrowing which from your incomes may appear ok but your existing loan on your PPOR you wil be seen as jointly and severally liable for the entire debt and this will probably kill the numbers.
Other than that as Steve has mentioned an 80% lend is pretty good especially if this is your maiden development.
Richard Taylor | Australia's leading private lender
I just had another thought – Perhaps purchasing some of the units through different lenders might get you a higher LVR?
Hi YI,
That sounds like a good idea. Have you ever done it before? Is there anything to watch out for?
Hi J.W,
Whilst I am a property investor myself, I generally sit on the other side of the finance desk with one of the banks.
For this reason, I will let some of the Mortgage Brokers who deal with all the banks lend their expertise on this one
As the 6 are already stratad then buy it 3/3 in different names with different lenders. Then approach council once you have sucess in settling to arrange for a block discount for rates being one "couple owning the lot. You may save $$thousands on council fees.
Has the strata been enacted or just approved? It makes a big dofference if you dont have to pay a strata manager as well.
Just a thought
DD
I'm only new to all of this, however if you were to buy 4 of the units that would give you control of the body corporate which would allow you to win the votes to do up the exterior of the units, with the other 2 owners forced to chip in 1/3 of the costs. sure, you would only profit from 4 of the units, but the banks would be much more likely to let you buy 2 each than 3 each….
Just because the majority agree for capital expenditure you cannot enforce such expenditure unless lot owners agree,
Richard Taylor | Australia's leading private lender
Sounds like you might need an equity partner of some sort. There are private investors who will lend under these circumstances (like mezzanine funders in the good old days!) but want a good return and security through a caveatable interest or second mortgage.
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