Hi guys,
My inlaws are looking to put 6-8 units on their block in Pascoe Vale Vic. They are now down to one income (husband about 100-120k) builder (subby). On paper their plan looks great they own the propery and at 200-220k per unit to build and sell at 500k plus per unit how can this go wrong!! lol!!!
They have 2 other properties
Essendon -owe 250k worth 550-600kRye
owe 180k worth 350kSo obviously they are cutting it fine with serviceabilty with their housing (I assume low doc loans being sub contractor?) and are now looking at purchsing another property in pascoe vale (about 700k) as the owner needs to sell. Probably 100-150k under what it whould be…
If they buy the 2nd property will they be able to build the units on their place? Or will they over commit and get no where when they try to finance the building of the units???
Your help with this would be greatly appreciated
Thanks in advance
Mick
mickm007 wrote:. On paper their plan looks great they own the propery and at 200-220k per unit to build and sell at 500k plus per unit how can this go wrong!! lol!!!Can't help you with the finance questions, but this is the wrong way of looking at it. Regardless of whether they own the land or not the land value must be added to the build cost to work out their margin and whether it is worthwhile going ahead with the project or not.
I am sure a broker will be along here shortly.
Development funding is still a little hard to secure. Banks often like to see pre-sales and given your in-laws seem to be 'stretched' these two factors may make the banks run for the hills.
Certainly owning the land outright will be advantageous – provicded it is sin't used as security for one/both of the other properties.
I would also counsel against your in-laws makign decisions based on best case scenarios. It would appear as if the Melbourne market is starting to tank. Typically small scale developers (mums and dads) get caught having trying to do developments, make a killing at the end of the boom or, even worse, when the peak has passed.
We are seeing a number of mum and dad type developers havign to sell their sub-dividable blocks through an inability to secure development finance. Typically these people bought at the peak and are now caught with a property they are stuck with. Caught betwix and between.
Sorry for my tardyness in my lateness to respond to this question.
Development finance is a whole new ball game but with past experience they should be able to borrow against the end value or Gross realisation net of GST. Serviceability is not necessarily an issue of the margins are right.
In regards to whether they can purchase another IP in the meantime this appears possible and Lodoc should not necessarily be the immediate way they should look at going. We do many self employed full doc loans but of course without a little more hard data it is difficult to provide an exact answer.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
1. Stick with full doc if you can…not to sure why you think sub-contractor = low doc???
2. Need to know a lot more info to know how fine the serviceability is.
3. As bumskins mentioned- there’s a lot more involved then just “the basic numbers….you be surprised at how much cost is involved when all the small fee’s are added together- selling cost, advertising, CGT etc, finance, council,Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
