Hi all
To cut a long story short:My husband and I have placed an offer (which has been accepted subject to finance) on an apartment in South Perth (priced well under market rate by at least $40k) but on company title as opposed to strata title. Our plan is to purchase for capital growth and long term (at least 10 years) investment.
Us folks in Perth are not used to hearing about company titles, so now hubby and I are in panic mode….apparently only the CBA will offer a loan to purchase property on a company title.
Our financial position is (conservatively) $:
Our home (place of residence) value $950k. Mortgage $175k.
Investment property value $430k. Mortgage $350k.
My husbands income is approx $250k per year.
Our finance broker (a close friend) has said steer clear of the company title etc etc. We would like some other opinions….
We can borrows the funds using our home as guarantor, we thought we could put down a cash 20% deposit and have a stand alone loan! but apparently no banks can mortgage company title shares..
Confused as nobody in Perth is used to dealing with this and would,like some feedback :)
Cheers Callie
Hi, if you google company title you’ll find more.
You say the property is $40K under market value but I’m sure you’ll find it’s $40K under market value for a strata title unit, not a company title unit.
They are usually priced lower. Some of the reason is the inability to get finance. so when you sell your buyers will have the same problem so you’ll be selling under market also. Also not having a stand alone loan will limit your abiolity to move forward if you intend to build a property portfolio.I don’t like them. The reason is you don’t actually own your unit. You own a share in a company. There can sometimes be restrictions. As it is a company “they” may put restrictions on you which you don’t like (unlike a strata where owners may have more autonomy).
I’ve seen some which forbid renting therefore you have to live in it (rare but it happens).
Notice I’ve used “may” a bit as they are all different.
Read the contract AND the company rules and regulations before you go any further.Thanks Catalyst.
We knew the company title was a hindrance but were under the impression it was just the precursor to the strata titles act, this is what the agent said and when we googled it pretty much said the same thing.
Am I right in saying that the banks don’t offer a stand alone loan and must have another property as guarantor? Which I guess means anyone who either doesn’t want to use their home as equity, doesn’t have sufficient equity or is a first home buyer will be cut out of our market when it comes time to sell?
The company rules and resident obligations are only a few pages long and don’t restrict renting etc, more along the lines of don’t hang your washing on the balcony.
Thanks for your feedback, appreciated.
Hi all
Us folks in Perth are not used to hearing about company titles, so now hubby and I are in panic mode….apparently only the CBA will offer a loan to purchase property on a company title.Very common in the older part of WA like freemantle and the south coast.
Hi all
We can borrows the funds using our home as guarantor, we thought we could put down a cash 20% deposit and have a stand alone loan! but apparently no banks can mortgage company title shares..
Confused as nobody in Perth is used to dealing with this and would,like some feedback :)
Cheers Callie
1. You DO NOT need a guarantor loan….that’s just stupid as you have a PPOR worth $950,000 and your gonna tie this down to this IP…no way- Cash out the 20% + Stamp duty and apply for a SEPARATE free standing loan with a diff bank using the CASH equity as security.
2. 90% LVR on company title is possible but it wont be the Big 4.
3. You have a healthy position/financially and equity wise.
——
Regarding investing in a company title there’s a few things you have to look out for + be aware of.
1. Check the restriction on the company’s by laws
2. Who owns what and does any one or 2 person have majority hold on the company title
3. What restrictions does the By law have in regards to selling and renovations ( The bank will want this by law by the way)It’s hard to sell a company title property, as you can see from your own experience so generally it lacks that capital growth as less demand for these sort of properties…unless it’s bought well below the market and has a good company by law in place.
Mick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
I have myself recently purchased a unit that was company title.
As there are possible restrictions on use etc it does lower the price when compared to properties that are strata titled. So I don’t think it’s necessarily a win that it “appears” to be below market value.
As Mick advises double check the company by laws to see if there’s anything there that would be a deal breaker for you. Be aware that the property will be less desirable to any further purchasers so don’t go chasing quick capital gain, you may not get it.
The property I purchased was quite cheap and generates positive cashflow so I’m under no pressure to sell as it pays for itself. Bear this in mind if your situation could change and you needed to move the property on.
Cheers,
Dwight
Dwight
Cashflow Positive Investor
Thanks MickC, Dwight and Terry
Useful information for hubby and myself.
Much appreciated!
Cheers Callie :)
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