95% LVR Vacant Land?

Are any lenders doing 95% LVR for vacant land?

*Permanent employee

 

Get a build contract. There’s lots of risks and extra costs settling land first.

Why do you want to just buy the land? Most of the reasons people have really mean they should wait and buy the land at the same time as getting a build contract.

 

I want to buy the land and get DA for multiple dwelling.

 

Would you mind elaborating on this some more for me? I have a block of land due to title in the middle of the year. I will have a 20% deposit for it (have already paid 10%). I will be building but have to sell my overseas PPOR first and this may not be finalised before the land settles. The profit from this will be used as the deposit for the build, so overall LVR for house & land will be under 80%. I presume i’ll physically need the money in my account, rather than a signed contract for the sale of the overseas house before the bank approve the loan for the build portion? Meaning i wouldn’t be able to sign any building contract??

 

That’s a long shot.is the plan to onsell once the DA’s approved?
Thsre are lenders that can do 95% but it’s hard, usually only for OO. Your better off trying to raise 12% and keeping the lvr under 90%.

 

Most lenders wouldn’t want to formally approve the loan until you had the AU cash in the bank, but they could accept the valuation, verify your income etc and give you a conditional approval.

 

Yes, that is what I thought. I'm interested in why you said though that there are extra risks and costs associated with settling the land first as this is likely what is going to happen in my situation I expect

 

Risks are valuation shortfall, changes to your circumstances, lender policy etc.
costs are changing/unknown site costs, diferent stamp duty/concessions, fhog payments.

 

Better to own the land with a building and tenant already there .
New York’s Chrysler Building hits the market
The landlord charges US$33m for the use of the land !

 

How is buying the land first more a risk?
My partner and I are looking to buy land first lending 80% from the bank, and we will cover the 20% + Stamp duty. If it makes any difference we are buying land off her mum and at about 20k cheaper than what is worth. so maybe less of a risk for us?

Also, construction loans normally interest only so buying land and paying P&I while the house is been build, wouldn't this be a good idea for some? Our brokers suggested us to do it this way.
Still new to all of this so correct me if I'm wrong

 

It’s rare for land bought in new estates to appreciate more than the sum of repayments. It’s hard to pay the land loan, rent and save the build deposit. Your case might be diferent.

First home owners will need to pay full stamp duty in many states, and can’t access any first home owner grants until they build.
The risk in committing to the land is the site costs to build could be more than expected. That your details change or the lending environment changes. Valuations, or the wider property market changes. Any of these variables can mean your stuck paying for land you have to mow and can’t build on.

 

This!

It's a tough deal to place. I'm usually not a fan of any land + construction deal that involve LMI due to the number of variables Tobe listed above. At 95% it's very risky.

Cheers

Jamie

 

What about at 80% lend?

 

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80% LVR is a gazillion times easier to finance then a 95% deal. There will be MANY more options when it comes to lenders and likelihood of approval is MUCH higher.

Cheers

Jamie

 

What about with a security guarantor?

 

It’s the same risk and then some, for the guarantors.

People buy vacant land all the time. Most of the time everything’s fine.

Most of the people I have seen who purchased land and sat on it would have been better off waiting and foregoing the interest paid and buying the land and house together.

Some of the people I have seen got into trouble. Either their valuations didn’t work once they did have a build contract, or the site costs were scary, and not recognised in the val, or their details or the bank’s policy had changed and they could no longer get a loan. Any of these are possible at any LVR.

 

Great post Beano. I really like the idea of offering a ‘ground lease’ on land that you own. Buy a block of land in a commercial type zone. Sit on it for a while (negatively geared). Then when the time is right, offer a ground lease (say 30-50 years) to an acceptable tenant. They get to build the exact building they want to their own specification with complete flexibility, and avoid the capex associated with buying the land. You enjoy zero development costs and no maintenance hassles going forward.

Has anyone on PC successfully offered a ground lease on real estate (land) they own?

 

There are many people who have created the leases
Speaking to these people you have to have something people really want something they cannot buy freehold . (Just like asking a tenant at Westfield's why do you buy your own premise. .well I want to operate in the mall and there is no ownership option)
ABC own their building in Brisbane but not the land
Australian Post own the GPO building but not the land
Would you buy the Chrysler land if offered to you ?