Hi guys
It would be much appreciated if you could share your opinion and thoughts on my situation:
1. Own 2 IPs (one co-owned with family & the other one owned by myself and husband).
2. Own 3rd IP with JV partners and in the midst of developing townhouses (with JV partners) to sell. It is going via RISKSMART process in QLD so expecting DA to come out soon – expected completion date is early next year.
3. Saw a property close to hospitals, uni and walk to train station and 10 kms from CBD – the property is earmarked to be rezoned (was not advertised as such, I got the impression the agent and owner does not know). The potential is massive. After doing research, equity gain is around $250k conservatively but if you follow what brand new townhouses are selling for in the area, the equity gain is $360k.
To add to it, it is a 'clean block' with sewer connections right outside front boundary and LEVEL.
4. Tried to purchase the property and bank just came back to say that if I purchase this property, it will negatively impact our borrowing capacity in terms of the development (due to serviceability).
5. The development is my first priority but I am really disappointed to let this property go as it is in ideal location. My strategy for this one was to build 3 townhouses and hold – this will be CF+ by about $500-600 per week.
6. I could try and buy it & to appease the bank, I'll sell the property I co-own with family (1 townhouse) to reduce my debt. My share of profit from the sale could be used to pre-pay interest repayments for this new property for a year. I think it makes sense to let one investment property go if another one provides better opportunity for growth.
7. Finance is mid next week – in order to purchase this ideal IP property, I need to refinance IP#2 which grew in value by $50k in 6 months!
Is this all just too much trouble? Should I just let it go and buy something else when the current development is finished and my cash flow, situation etc are much better? Am I biting more than I can chew? (I know Im the only one who can answer this? What if I say I think that I will manage just fine especially if I sell my othe rIP)
Am I getting emotionally tied to this property (I don't think so – I think the reason I really like this one so much is it ticks all the right boxes in terms of what I am looking for.)
I don't want the bank to think Im being stubborn and then penalise me later by not giving me construction finance
PLEASE tell me – what would you do in my situation?
Thanking you….
If it's in the blood, it's in the blood, and we just can't help ourselves.
I believe in always looking at our portfolios as a flexible process, that as we learn further adjustments can be made.
The co-owned property was probably a good idea at the time and sometime one half will want out for lots of reasons.
If the new deal is far better say in 3 yrs time than hanging onto the other then of course you will be going through the ringer, the question is can you get out of it soon enough to proceed with the new one.
Been in the same spot twice, once it came together, once I missed it.
Enjoy the process
Barry
Hi Barry
Thanks for your reply. You are right – we bought with other family members to get started into investing. It was the right strategy at the time but now a better opportunity exists.
I realised that the bank didn't want me to get the property as banks are usually quite conservative.
But if we don't risk a little – we don't gain, right?
I'm going for a finance with my other bank now and I hope I get finance and then I'll sell the other one.
In terms of the construction loan, I suppose I'll cross the bridge when I get there.
Wish me luck
Serviceability varies from lender these days and there is a massive difference between institutions.
Some lenders are increasing their serviceability rates although 2 lenders have reduced them to allow the client to borrow more.
Finding a lender fund 3 units on the same Title may not be that easy though especially if you are close to max serviceability.
Where there is a will there is always a way.
Richard Taylor | Australia's leading private lender
thanks for your reply, Richard.
I think I will hold the new property (if I get finance) for at least 12 months.
The current development I have should hopefully give me some cash later to inject into the project of 3 units in order to get finance. I may do them as freehold and will rent them out. If I can show the bank as much argument I can that they will be (once constructed) $500 CF+ per week, they may finance the deal. If not, the house is a good investment as it is, and I'll try again at a later time.
Hopefully, my strategy work. My husband & I work full time and have 3 kids. I would love to be able to cut down and work part-time as the kids are growing too fast
Ive been reading your posts and you inspire me. I hope to be in your position one day
If serviceability is a problem you may be able to bring someone else on board who can help. ie someone on a high income who can help you get over the line. They could take a share of the project for their input.
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
Terry’s idea could be worth considering. Instead of selling, and risking the bank not being able to service your construction loans, why not bring in someone else to help you finance it and take a 50/50 cut. Just an idea.
But I agree with Basbog, things change over time. Why might have worked for you 3-5 years ago might not be working today. I wouldn’t be scared to cull off the old properties in order for a more lucrative property. If you make more money and it gets you closer to your goal of financial freedom then why not go for it?
Ryan McLean
http://CashFlowInvestor.com.au
Positive Cash Flow Properties Are Just a Click AwayRyan McLean | On Property
http://onproperty.com.au
Email MeTerry and Ryan,
Your replies have helped immensely, thank you.
It always help when I hear the opinions, and comments of like minded people.
Sometimes, when I talk about my investing to some friends or workmates their jaws drop and think Im crazy for taking on too much debt or risk. What they don't realise is, it is: 1. a good debt; and 2. a calculated risk.
"Be risk aware, not risk averse".
Carpe Diem, all!
ID H
Yes regretfully whilst the properties may be + cash flow lenders work off a serviceability rate which can be upto 2.25% higher than the actual standard variable rate and this tends to disort the true affordability.
Richard Taylor | Australia's leading private lender
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