All Topics / Help Needed! / What can we do with lots of equity but little cash flow?

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  • Profile photo of o0tegs0oo0tegs0o
    Participant
    @o0tegs0o
    Join Date: 2010
    Post Count: 21
    March 4, 2011 - 3:45 am

    Hi all,

    Any ideas/ contributions muchly appreciated!

    My parents have a property worth $1.2mil with $900k of that equity. We would like to set up a family trust of some type so that we can start doing some samll developments together.
    In their current situation, they only earn enough to service the remaining $300k loan on their property and i have the capacity to borrow about $200k from the bank. I guess what im trying to say is that, if we set up a family trust will the bank allow us to pool our assets (their equity and my borrowing capacity) to take out a $500k loan to build a duplex for example?
    What happens with holding costs? In between the date of purchase and the date we sell the duplexes do we need to come up with the funds to service that $500k loan every month?
    Sorry if the very obvious answer is yes but i just wonder if there is a way around it?

    Thanks in advance!

    Profile photo of TC62TC62
    Member
    @tc62
    Join Date: 2011
    Post Count: 45
    March 4, 2011 - 4:30 am

    Hi Tegs.

    I guess the first thing we need to understand are you and your parents motivation for developing and duplex's? It is for growth – short or long term? Is it for tax reduction/minimisation?
    I would need to ask a lot of questions before I could answer your questions with some degree of accuracy Tegs. My suggestion is you and your parents need to sit down with someone who can look at the pro's and con's of what you're wanting to do and realistically advise you on your various investment and borrowing options. Why not talk to a mortgage broker first and explore the various loan products available, their suitability to what you want to do, and your capacity to borrow and service a loan? Best of all, mortgage brokers are FREE!

    CHEERS!
    TC

    Profile photo of o0tegs0oo0tegs0o
    Participant
    @o0tegs0o
    Join Date: 2010
    Post Count: 21
    March 4, 2011 - 4:46 am

    Hi TC,

    I guess our main goal for building initially is to create some cash flow and learn the ins and outs of small developments so that we can work our way up to bigger better things as time goes on.
    Preferably buy and hold but if this isnt possible in the beginning due to cash flow then we'd sell up and leave the buy and hold until a little later down the track.
    I will certainly take your advice and pay a visit to a morgage broker in the mean time though..

    Thanks for your help!

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024
    March 6, 2011 - 12:13 am

    Tegs

    Your situation is one we come across with clients on a regular basis and actually have a forum member this week who we have assisted financing exactly what you are wanting to do.

    I would keep the 2 loans totally separate and structured correctly you could do the deal over and over again.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

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