All Topics / Finance / Vendor Finance Property with Planning Permit for a Townhouse in the Backyard
Hi All,
An opportunity has come up where a vendor is selling their property on 100% vendor finance with a planning permit attached to build a townhouse in the backyard. The property is located in a bayside suburb of Melbourne.
As my business partner and l have a construction company that specialise in dual occ and multi unit developments this project has our required IRR and plenty of profit in it once done. Feasibility already complete.
But what we are wanting to do is purchase the property on vendor finance and then obtain some construction finance to build the townhouse and then sell both the new townhouse and front house once construction is complete.
We would normally just buy the property and then obtain construction finance and build but we see this opportunity as not requiring as much capital as we would not need to spend nearly 600k for the initial purchase.
Can anyone please offer some advise as to if this is possible and if so how it would be potentially structured?
Regards
Maurice
Hi Maurice
You can buy the property with a vendor finance Instalment Contract (IC) but in this case it may be better to control the property with a Lease/Option (L/O).
However the challenge with either the IC or the L/O is the security required for the construction finance, i.e. you aren't on Title and therefore can't supply this property as security. One way to overcome this may be some sort of JV with the title holder, allowing the security to be provided to the lender.
I would also suggest you contact the excellent finance brokers in the Finance sub forum here. If you consider the JV idea, I'd suggest you have a talk with Lewis O'Brien at:
Lewis O’Brien & Associates
Suite 113
89 High Street
Kew Victoria 3101phone: 03 9888 6388
fax: 03 9888 6366Lewis is very familiar with the structuring of JV's.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Hi Paul
Thanks for your reponse.
I've meet with Lewis previously so l will get in contact with him regarding this situation.
Regards
Maurice
Yes, it will be impossible to borrow (you) against this property unless you have the title transferred over.
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
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