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Getting a loan for leasehold property?

Discussion in 'General Property Chat' started by Beelzebub, 4th Aug, 2016.

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  1. Beelzebub

    Beelzebub Well-Known Member

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    I have just recently booked at the snow and, being interested in property, was wondering what the costs of purchasing on the mountain would be.

    It turns out; however, that due to the resorts being in national parks most, if not all, of the property is leasehold.

    So, I'm wondering, how do you go about purchasing leasehold property? How do people actually own up there? I can't imagine too many banks being keen on lending out for leasehold.

    Now, before you tell me it's a bad idea, I figured that out before I looked, I'm just curious about the mechanics of it work and if banks actually lend money for this.

    I'm also wondering if there is some sort of option within the lease to extend the terms at minimal cost? I wouldn't pay $500k for a 50 year lease... It would be gone in my 70s
     
  2. Marg4000

    Marg4000 Well-Known Member

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    Isn't all land in Canberra leasehold?
    People see, to have no trouble buying there.
    Marg
     
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  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Snow lease loans arent an issue per se

    ta

    rolf
     
  4. Scott No Mates

    Scott No Mates Well-Known Member

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    You generally take an assignment of the balance of the lease - a new lease/sublease isn't granted upon each sale.
     
  5. Beelzebub

    Beelzebub Well-Known Member

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    That sucks. What happens at the end of the lease term? Do I have to pay another $300k or is there some sort of option built into the lease that lessens that blow?
     
  6. Scott No Mates

    Scott No Mates Well-Known Member

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    @Beelzebub - Resort Management, who hold the head lease will generally negotiate a new lease with lease holders. From past experience, RM have generally renewed most of the alpine leases at Falls Creek (very few were rejected/not renewed). Approval conditions were quite stringent including energy efficiency, installation of stainless mesh window screens/other bushfire hazard reduction works, native grass regeneration/landscaping/removal of weeds, painting of exteriors to approved colour palette. If the lease isn't renewed, there's the make good obligations under the lease ie demolition.

    You won't be up for $300k, this would be the cost of purchasing the current lease from the outgoing lessee (includes the physical value of the improvements).
     
  7. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Lenders will base their loan term on the remaining term of the lease.

    If it's got 60 years left, they'll give you a 30 year loan term as normal. If it's got 15 years left, they'll allow a 15 year loan term.

    With ski resorts the challenge can be getting the lenders to recognise the income...
     
  8. Beelzebub

    Beelzebub Well-Known Member

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    Okay, that helps. I'd guess that banks would want a pretty high LVR too? My guess would be they wouldn't touch it for anything over a 70% LVR? Surely the risk is higher for them not being freehold title?

    Also, so it works like this? The resort holds the head lease, a block of land to which they built a whole bunch of units, they then sublease the units. After 40 years, or however long until your lease runs out, the head-lessee is required to upgrade their property by Parks Vic, once this is done a new head-lease is entered into and the head-lessee will enter into a new sublease with me for the amount which recovers the costs of the building upgrade?

    So, in practice I'm not going to have to re-purchase the entire place again and will still have an asset of value in 30-40 years time? Unless Parks Victoria refuse a new head-lease?