Hi
We bought a property in 2009 having a view that we would demolish the existing house and build two units.
We would sell one of them and keep one for us to live in.
We started the process soon after we purchased, last year we were able to secure the planning permit to build two units as we wanted. We started the process of getting the building permit.
When we approached the bank to lend us bit more for all the processes and subdivision, they asked us the purpose and we told them the whole story.
The bank said, our income is not sufficient to service the total debt (Existing + Top-up + Building Cost).
Our plan was to secure enough top-up now to support the loan for one year and when one is sold, come back to affordability from income stream.
The bank denied us the top-up as the plan they think is not suitable to their requirement.
Now whats the best way out, we have already spent 20k on the process so far.
The options we have:
1. Live in as is and forget about development till we have income to support (disappointment, 20k down the drain)
2. Sell the house with plans and permit ( I am not sure if we even be able to recover the money we spent so far and then we need to buy another to live in it thats additional 30-40k for stamp duty and 10-20k for selling it self)
3. Go ahead with subdivision (another 20k), demolish the house and sell the block. When that is sold then build our one to live. (Number of people interested in block are much less than completed house, when we demolish we need to rent and our funds may not be sufficient for an extended period (6-7 months) should the block takes time to sell)
4. Find a buyer upfront to buy the completed and then go to back with proposal again (It would be difficult to find a buyer + what guarantee that bank would agree then + even if we find buyer the price we would get may not even cover our costs)
5. any other you think…
You should talk to a mortgage broker about this one (there are plently of good brokers on these forums). Surely there is someone out there who will lend money to you.
Luke.
Rent and rent your property out. This will add income to you and increase your eligibility for higher loans.
You will be able to move back in and still claim it as your PPOR for up to six years, to avoid the CGT.If after completing the two units, the yields are low and you have based your assumptions on capital gains, then sorry, you made a bad decision. If the yields are high, then they will sell to investors seeking yields.
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