I am currently going the the process of gaining finance for a 3 unit development. Once completed the bank using their servicibility calculator that it will be to tight for me to service the units. As such they want me to sell two (which doesn't bother me)…. but they require those 2 units to be pre-sales (which does bother me). I have no hesitation in my mind that I can service the loan and would like to keep all 3, but thats the way the cookie crumbles with the banks at this point in time.
I believe that this may be hard to do. The units aren't in a trendy area. They are fairly stock standard. The deal however around the 25% margin and I do not want to let it slip by. I am not saying that the units are not a bad purchase off the plan but I think it will be hard to sell them as presales.
If a party wishes to buy one off the plan unconditional does my bank just require to see the contract? or do they need to see the other parties finances? In my eyes that would be an invasion of privacy. If they don't have the money now that does not mean they will not have it by the time the units are built.
Now this is where I am trying to get inventive.
If I can find a "party s" to buy them off the plan unconditional and I present the contracts to my bank that would obviously make the bank happy……. (hopefully)
Now if this "party" lets say wanted to walk out on the contract one month from settlement (once finance had well and truly been sorted), and I was happy to let them that business would be between myself and that party….. and not my bank….?…?…. Could my bank do anything to me…. or force the "party" to stick to the contract? I am assuming not but the question had to be asked.
I understand that my bank would be wanting me to find a replacement purchaser as soon as possible but if I can't I can't…. and if I was servicing the loan fine (once completed) what would it matter at the end of the day. The option would then be there to refinance to a resi loan.
Thoughts on this would be a big help…….. Im treading a fine line…… but get rich or die trying……..
Yes they would certainly require sight of the Contract and would be no Privacy Issue as you are the Seller.
They would also require to see that a 10% deposit has been paid if they have requested pre-sales.
In saying all of this i have never heard of pre-sales on a 3 unit block development these are done as resi deals from the start with many lenders.
Richard Taylor | Australia's leading private lender
I agree with Richard:- the deal is too small to be asking for presales. Shop around.
Hi Fredo,
The guys are spot on. This should be a residential loan for 3 units and you shouldn't have to have any pre sales. We went with NAB to build our 3 units and we have kept all three. There was no mention of selling any of them, we were pretty clear we wanted to keep all three. We had to shop around as one lender would only lend if we were building 2 units (uhhh no chance, no profit) and other lenders wouldn't get on board at all. Shop around, it is your money in the end and why should the bank control what you want to do with you investing.
good luck
D
DWolfe | www.homestagers.com.au
http://www.homestagers.com.au
Email MeWould agree with others, that you won't need pre-sales if its a 3 unit development.
We are talking to couple of banks for a six unit development. Although me & my business partner meet the servicieability requirement for the develop & hold strategy, the bank was 'suggesting" we should get some pre-sales.
We appreciated their advice, because they were pointing towards that fact that, if we want to do more developments in the future, then this would become an issue.
So we said, we won't do any pre-sales, but definately sell some after the development, before we approach them again for the next development. Verbally they said its fine. Will see how it goes…when the actual application goes…..
All the best.
There are a few non banks around still who will fund small developments with no or at least very minor presalae requirements. Three units, if there is a good margin would be very easy to do with no presales, with 6 units and a strong application 1 presale would be enough to go to about 65% GRV and 2 would get you to 70%.
Regards
Alistair
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