Duplex build with a freind

Hi All,

I am thinking of getting onto a land and construction loan with my best mate.

I don't have cash upfront with me currently as its tied up in other personal matters but my mate does. Together we have the borrowing power to do so. But I wanted to see if the following scenario would work and if anyone has seen a better way/another way/ other things I need to consider.

Assumptions:

Group A (me) and Group B (my mate) get the loan jointly
Land = 800,000 for a land that already has 2 equal lots
Construction 700,000

Deposit used = 150,000

Loan needed = 1,350,000
Each Group liable for 75,000 for the deposit.

Group A loan = 750,000 (since I didn't have cash upfront and my mate helped with my share)
Group B loan = 600,000

Can we have the loan drafted up in such a way such that each owns 1 Lot but the total loan is not 50% each i.e. its not 675K each.

thanks

 

yes its possible.

 

Think very carefully here. It's a good way to lose a best mate.

 

Which bank best does this mate ?
Or is it a common thing ?

 

Can you give me an example of that ?

 

Don't go direct mate, get a good mortgage broker for this type of deal
You'll both have to be jointly liable for any debt.

 

Yeap I will go to a broker

Mai the total loan can’t be split in any way but 50 /50 assuming each party gets one 250sqm lot ?

 

Once built, yes,
prior to and during construction, no

 

I see thank you

so essentially as the duplex is being built the 1.35m is divided amongst two people equally

post construction , do I need to refinance so I am liable for more share of the loan since my mate paid the whole deposit?

Thank you

 

You need a property share product which CBA offers.

You'll both be guaranteeing each other

 

Is the plan to sell at the end or hold?

 

They don't offer it for land or construction purposes mate...

 

Hold both mate why ?

 

Just for my own curiosity
Seeing a bunch of build and sell duplex/townhouses up here (SE QLD) at the moment

 

I see , check your inbox mate

 

My best advice is to not rush into this. It could be a brilliant idea or the tax, legal and finance repercussions could mean this is a terrible idea.

Talk to a good broker (to understand how finance works), talk to a good lawyer (about how to set it up fairly, effectively and understand the legal ramifications) and a good accountant (about how the ATO will view this and advice on the tax implications of some structures/entities)

Once you know the pros and cons then work on how to find a site that fits your purposes. Please do not find a site then make an offer and then think about how to structure/finance it.

Prior planning prevents p1$$ poor performance.

I've done 2 joint ventures and they are definitely more complicated but can also be rewarding if set up correctly and everyone is on the same page.

 

Thank you mate

check your inbox please

 

BTW with a $1.5m total development cost you might find that $150k is not enough deposit. That is only 10% and getting an LVR of 90 on such a project is potentially unlikely though might be possible if it already has 2 titles? Though if it has 2 titles then not sure why you'd need to JV and just borrow the deposit you need off your mate. Again though the bank won't like that because it's not genuine savings.

Most banks will want 20% deposit on the whole project.