80% LVR on commercial finance

Hi Guys,

Anyone know of any lenders doing 80% LVR on commercial finance?

 

Depends on the type of commercial finance. Business? Property? What sort of property? Where is it located? The term, "Commercial finance," covers a very, very broad range of scenarios.

There are commercial lenders that will go to 80% on very straight forward generic low risk commercial property purchases, but realistically most deals don't fall into this category.

For example you're not going to get an 80% lend on a property that's even remotely specialised such as a service station or even a restaurant. It is possible on a small warehouse or office space if it's in a metro area.

 

Good point Peter - was a little vague there.

It's residential property, but has plans and permits attached to the land - and thus, is being valued as a development site.

 

Commercial development can be up to 80% of the hard costs (land value and actual development cost), but the limit the end value LVR to about 65% - 70%.

Again it's often assessed on a case-by-case basis. For development they want to see that you've got an exit strategy from the finance (which is where pre-sales might come into it) and that you've got the experience to actually pull the whole thing together.

If it's a smaller deal (say 3-4 properties), 80% is available under residential policy which is generally preferable to commercial finance.

 

Yup, at the moment - my priority is just to settle the land sale, as I'll be living in the property for at least the next 18 months.

The existing plans are useless and will never see the light of day, but because they are attached to the land - valuers won't value the property as residential... Hence the commercial enquiry.

I've had a deal done at 80% LVR with NAB as a commercial loan previously - but that was a few years ago and didn't have permits attached.

Spoke to my guy at Westpac a few days ago who said that if they couldn't do the deal as residential, it would get cut down to 50% LVR with commercial.

That sounded a little excessive.

 

We had a deal not disimilar to this recently. Residential purchase, there were development plans/permits attached. The problem was the valuers insisted on valuing with the plans and permits even though there was no intention of ever actually using those permits. The moment the bank saw the valuation, they decided it was commercial and wouldn't touch it under residential.

We managed to get a desktop valuation with another lender who then simply took it at face value as a regular purchase of a residential property.

One of those lousy situations where it's a resi property, but the valuer can't simply give a report ignoring the plans and permits. It would be so simply for them to say that they've sighted plans and permits, but the report ignores these and values the property without considreation to those permits.

 

I'm not a broker but I concur with Peter that you should be able to get around this though it might not be simple.
If you go 80% LVR on a resi loan where they take the contract at value and do a desktop you could be onto a winner.
Go see a broker and work around it if you want the site as it is.

 

It's been posted somewhere else. The contract value is well over a mill. Only Westpac might have taken a desktop/cos cal, and for some reason Westpac have already done the evil full val.

Commercial finance for development usually means the purchase and build together. They might lend 50% for the land and then maybe 80% of the construction hard costs.

 

This is exactly the situation I'm in. I looked briefly into the desktop valuations - but I think the price may be the issue here (1.5 million). If I could find a lender that did COS or a desktop valuation at this price, that would be brilliant.

The valuers are a pain in the ass. I know they have to list highest and best use, but their rationale for determining this can be very flawed. There are plenty of sites being sold with permits at the moment that aren't worth the paper they are written on (e.g. sites where council has issued a permit, but the the plans don't comply with building regulations and would fail to get a building permit etc).

 

Yup - working on it now with my broker. Just need to find a lender that will do contract value at 1.5 million.

 

At this point, I'd probably be happy to take a hit on the the rate just to get it over the line - as long as I could get 70% to 80% LVR. Definitely a lesson learned for future purchases.

 

At that price point, I think everyone is going to want a full valuation. Not an easy one to get around.

The solution is probably going to involve a full valuation, but with a lender that's flexible enough to give the valuer alternate instructions. It might be possible to find a preferred valuer for a particular lender and order (and pay) for the valuation yourself, then take that to the lender.

 

@opal3259 Have you or the broker considered bank bills?

 

Has anyone managed anything similar to this in recent times? With more formalised Standing Instructions etc I thought this was becoming harder and harder to get banks to accept.

 

Hi Scott, showing my ignorance here.
Just did a Google search on bank bills.

Can you elaborate on how using a bank bill would work in this scenario?

I'm assuming it's a form of alternative commercial finance where you'd have the bank bill short term... and then refinance at it's expiration to a different product?

 

Bank bills are just another way of calculating variable interest rates for commercial finance. Instead of an svr with a premium or discount, it's the bank bill swap rate with a premium. Like picking a loc or a fixed rate, it won't help getting the loan approved or negate the need for a valuation I'm afraid.

 

Right. So Scott was suggesting it more from a rate perspective... rather than negating the need for a valuation. Got it.

 

@opal3259 - i have previously used BB for vacant/raw industrial land, no DA or tenant. Latest APRA has probably changed the banks' appetite for risk.

 

Thanks Scott.
I'll bring it up with the broker when we catch up next week.

 

Anz does up to $2 mil desktop in some suburbs??