Hi;
I have subdivided my property and want to build but I the biggest problem I am facing is being able to borrow to build. Unfortuantly I have made the mistake of purchasing all the properties in my own name, therefore I have no capacity to borrow, I would apprecaite some advise, surely there must be a way I can build these two houses and benefit such that I can enter the property market, I am tired of working 9-5 and not being able to look after my children. Any suggestion???
thanksWelcome Bahar7-
I understand your frustration! you work hard, and when you go to the bank to borrow money they reject you! like your some sort of disease or criminal.
But if you look at it from the bank’s view- if you can’t mathematical “afford” the loan, then it would be bad practice for them to lend you this money, forcing you to work more just to make end meet.
To be honest there’s not much even us broker can do if you “lack ” the serviceability, no matter how creative we get if your serviceability is very low, there’s only so much one can twist….if you have more money going out then coming in; then it’s hard to convince a bank to give you extra funds.The question is, How bad is your serviceability? are you off by $50,000? $100,000?
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Bahar7,
Steady as she goes sailor !
You are about to embark on the greatest mistake of your life. Rushing property investment.
You've done the right things .. you've got the big block to subdivide … and … now you reach your dilemma. Serviceability !!!!!
The good news you arent the first person in history to reach this point with the banks. Granted I am not 100% sure who the first was … Plato .. Socrates .. Nero? But .. you arent the first by a long shot.
You'll need to think creative solutions. Banks arent stupid, despite the numerous ways people try to fudge their figures and make things look good. They like straight down the line .. hard facts. And to them .. your serviceability doesnt meet par with their requirements.
Two ways of handling this. The first is to run around and see what you can get from other borrowers .. or approach private lenders. But .. since you have a situation where you are pushed already .. there may be little hope from there. I find that some non-bank lenders (who are owned by banks .. figure that one out) are a little more flexible. But they still have serviceability clauses .. regardless.
The other is to think outside the box on your deal. Two things will work in your favour .. time .. and your ability to get things to happen. Try approaching builders .. see if you can work out an effective deal. Private funds … hard to get at the moment … would require substantial equity at least. And from your scenario I dont think you have that yet.
You want to escape the ratrace? … the first thing to do is stop thinking property is quick money … and start thinking of it as SMART money.
On my second investment … the bills got awfully close to the margin .. to the point where several times I approached my father and suggested I should sell to relieve my debt burden. His answer was to hold on .. and bear with it for another four months. Four months later … the property was still a debt burden. But the rent had gone up 10 dollars .. and the value had increased another 20k. And all of a sudden the figures didnt look that bad.
If you are in a holding pattern thanks to serviceability issues there is really only two things to do. Cure your serviceability issues either financially .. or .. creatively. And .. do your research as to what others have done. Read up big.
I also notice you mention the property being under your name only…I mean if your married you can use your partner as a guarantor for the loan to make it service?
A guarantor loan would def work in this situation.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Thanks for your answers, I can't use my husband as on paper he has no income. Although Serviceability is part of the issue, it is not the whole issue, I think as suggested I will talk to small lenders and see how I go, I have waited for 7 years, it's time to build and get in to the market. I did also speak to a few builders but they want to be smart and take all the profit, unfortunately my husband doesn't share the same passion, so I need to be smart and a step ahead, thanks I'll try the small lenders.
Start small grasshopper – if the blocks have now been sub-divided consider sellign one/both blocks off and use the proceeds as the launching pad for your future.
I reckon getting something is better than getting nothing. Sure it's not as good as getting the lot but…………….it beast nothing.
If banks see you as lacking serviceability I would be worred about your ability to accomodate building cost/time blow-outs and slow sales at the end of the project. I have seen too many small developers bite off too much and go belly up.
Slow and steady will get you there.
I agree, I also think if I sell one and use the proceedings to build the other it is also a good start that way i can start subdividing my second lot of property.
thanksI should also have added – check with your accountant about any CGT issues you may have with the sub-divide and sale option. At the same time check with a broker to see if the sale of one of the blocks will help your serviceability to the extent you want.
Banks are wary of 'mum and dad developers' at the moment so don't be surprised if you have to jump through a few extra hoops.
I suggest speak to a broker, rather then you going to different small banks your self
1. Save time
2. You dont want to many inquires on your CR ( will cause a massive problem)Your another options is to build one first, then instead of selling it- get it RE-valued…and if the price is high you can use this as a 2nd security to build the next one- Yes you will be crossing your loans. but it’s one of your only options with your serviceability.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Barhar7, Have you considered a joint venture with a developer? If you have enough equity in the property and are willing and able to continue to service the debt a developer may JV with you. This could mean they put up the building cost and you split the profits. Not sure what area you're in or the details of the asset. We might be able to assist with this – you're welcome to PM me if you want to look into it further.
If you're married, you could use your partner's name or maybe you could ask help from your parents.
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