Borrowing through a property unit trust

Hello Friends,

Getting into a JV with around 5 investors for a potential property development.

Can someone please suggest a way to borrow through a property unit trust?

Talking about $1.2mil for a potential land acquisition and looking to put in 20% deposit, how do we go about borrowing the remaining 80%

Thanks in advance
Sameer

 

It'll be really tricky to get finance for 5 borrowers. Have you bought / invested in anything together before?

 

Probably not a good idea. Have you had legal advice?

How the borrowings happen would depend on the structure is set up and the individual's circumstances.

 

Understand!!, 2 investors are cash rich and have no issue in borrowing whereas 3 are maxed out on their loans. We could potentially set them as the initial borrowers and transfer units once the project is funded.

 

No, we haven't bought together before, Other investment I made through property unit trust was to pay it all in cash, no bank involved.

 

You have a tonne of issues here to consider.

If you do a unit trust the profits of the unit trust are payable to unit holders. This might not be a great result if you are still selling off the apartments and looking to reduce debt before returning profits to the investors.

I have come across new clients where the business is hamstrung because one recalcitrant investor insists on 100% of the profits payable to them is paid immediately.

You could consider having a unit holder agreement where the unit holders will require a lengthy amount of notice to give the unit trust to call in the loan - but that is just one example of smart business thinking into such an agreement.

 

I think it is more than a unit holder agreement that is needed, but a rethink of the structure - it may be heading in the right direction, but there could be better ways to do it.