Hi can someone please tell me the best way to set up finance for an off the plan i/p
i have placed a 10% deposit on the land i have now got finance in the form of a split loan to cover the full 20% deposit stamp duty and legals i have a loan approved in principal for the 80% which I’m told will be approved once the title has been granted and the land valued a second time I’m still to arrange finance for the construction
It seems to me to be a long and tired sum process
Is there a better way ????Hi Keith,
Where is your IP being built? Have you done your due diligence in terms of researching the area for growth/rental yield etc? I ask this because I built an off-the-plan IP 8 years ago without doing my research and it just hasn’t performed how I hoped it would. I picked a new estate on the outskirts of Adelaide to build because the land was cheap (85k) and future growth never even entered my mind as I was still fairly new to investing back then. Fast forward to 8 years later and even though I have good equity in the property which had been created by the time construction had finished, it’s only grown in value by about 8-10% over 8 years. There are now a huge amount of similar properties in the area competing for tenants which drives rents down due to oversupply compared to demand. I’d hate for anyone to make the same rookie mistake that I did.
I found the financing process very drawn out as well, it could be just how it is, particularly if there’s significant time between the land settling and the beginning of construction. I had two separate loans. A standard variable rate loan for the land, and a construction loan for the build.
cheers
PeteHi Keith
No what you have described is a standard financing set up for most investors.
Couple of words of caution make sure the end value of the land and construction comes in at land contract price and fixed price building contract as we see many investor caught out where the property does not value up.
Also if you have already paid 10% deposit make sure you have structured it correctly as it is not merely a matter of reimbursing yourself and hoping you can claim the interest as a tax deduction.Cheers
Yours in Finance
0-40 properties in a decade. Ask me how.Richard Taylor | Australia's leading private lender
Thanks Richard can u please explain how I do reimburse myself as that was what I had planned to do But I am also planning on purchasing another I/p once I have this one tenanted so funds left over can go to the deposit on the next
Keith.
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This reply was modified 9 years, 3 months ago by
Keith.
Thanks Richard can u please explain how I do reimburse myself as that was what I had planned to do But I am also planning on purchasing another I/p once I have this one tenanted so funds left over can go to the deposit on the next
Hi keith
I don’t think you can reimburse yourself – admittedly I’m not an accountant though.
I’d assume that 10% cash deposit you’ve paid is gone and can’t be reimbursed. It’s not the end of the world though -like you said, you’re looking to purchase another so you can use the remaining funds for that.
In a perfect world – you would have either a) used your equity release to cover the initial 10% deposit/costs or b) used a deposit bond.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
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This reply was modified 9 years, 3 months ago by
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