3 Townhouse development loan problem

Owner Builder then, even trickier to get finance for.
What does your net profit % look like? I'm assuming you've done a feasibility study for this project?
What often looks like easy money, isn't

For the initial purchase it wouldn't be an issue, the issue would be when you go to develop it.

 

I have asked my broker and got the reply that it is very hard to buy the property under home loan at this stage (tight condition affected by virus) as the property has the DA for 3 townhouse which will make it easy to get into commercial.

 

Sounds like they're taking the easy way out...

 

This is not necessarily correct. Just because a property has a DA on it doesn't mean you will be developing it. So you would settle on residential finance - if you could otherwise qualify.

There are many properties sold with DAs.

 

Selling a existing proprty with plans and an approved DA can avoid all sorts of tax issues (even be tax exempt) and likely command a higher price. Without the GST, risks and costs and time involved in a development.

 

Therefore, it means you can help us make the property purchase as home loan. Could you please leave you mobile and I can call you for further enquiry?

 

Sorry I wouldn't want to take this one on.

 

It's really interesting that every broker here said home loan is fine but nobody is willing to do it. If you do no take it, why said it as that simple?

 

I didn't say it was fine, but said it was possible. But based on what you have written it might be a difficult loan in your situation.

 

Just because a broker says it's do-able doesn't mean they want or need the business... Brokers are free to choose what business they want to take on.
You mentioned your intention is to develop then sell these properties which triggers a clawback fee from the lender to the broker, which is not ideal as there is a possibility you won't pay said claw back to the broker, therefore the broker did the work for free. I'm not saying you definitely won't pay it, I'm just saying there's always a possibility a client won't pay it when requested.

 

Also please note that brokers can't offer you their services on here as it's against the rules. If you like the sound of the advice from the broker you will need to contact them directly and then go way more indepth before they could give you proper advice.

 

if your borrowing capacity is maxed can you still get construction loans? etc do they look at construction loans differently then home loans? as it's only a short term loan as long as you have a deposit and valuations stack up?

 

Not under residential lending but potentially under commercia

 

Most of the brokers here go for the low hanging fruit so don't take it personally

 

If by low hanging you mean people who have jobs or run profitable busineses, dont believe in unicorns and have a bit of equity then yes

 

Am in similar scenario prior to covid no issue getting construction loan, today its a different story. Am using cash and will then refinance on completion

Hope this will all change soon, developing property is currently on the nose, lenders not too keen