How do banks take profits from JV's

Hi all,

I am planning on renovating and selling by using a family member as the 100% money partner. After this doing duplexes, again using a family member as a 100% money partner. Assuming everything goes well question is how will my serviceability be from the profit from these deals as i then would want to use my own funds for future developments.

Thank you!

 

Little unclear with the question. Can you please elaborate bit more?

Cheers,

 

Won't improve serviceability because this is a one off project and not income which will be recurring for servicing.

 

I think you're asking, how is the capital gain from previous projects applied for serviceability purposes to new projects?

Short answer is in residential lending, lenders don't consider capital gains for servicing purposes. It doesn't help you at all.

It can help somewhat in commercial finance as it shows a track record, but one deal isn't really a track record. There's a lot of other hoops to jump through as well, so this may or may not be a solution.

 

Hi,

I asking if I do flips and duplex developments (selling these) in a jv where I'm using a family member as a complete money partner, after a few of these deals will I be able to borrow in my own name as I will have a track record.

Thank you

 

Hi Peter thanks for your reply,

I was under the impression that this would be treated as a business income is this incorrect?

 

So if I do multiple projects will it be treated as an income? For example if I do 2 flips and then 2 duplex developments will this be treated as income which will give me serviceability?

 

Over a period of 2-3 years it might be treated as business income. More likely to work if you set it up as a business complete with ABN and GST.

If it's just one or two deals, you'll need a more extensive track record.

 

Yes it could be. You would be treated as self employed if you are doing this on revenue account. However, they will unlikely want to give you finance on a residential loan if you keep paying them out.

Perhaps look into setting up a LOC and/or substitution of security.

 

Banks wont even place any reliability on the numbers for a estimated profit unless its a commercial dev and they have vetted the borrower for experience and past devs AND their numbers stack up. (No beer coasters allowed) I have seen loads of these devs vetted by a bank and they fall apart when they ask for a tax advice letter concerning margin scheme, GST and other tax aspects.....

This is a area where a good broker will be a must. Lender policies vary. I find if good broker, good client numbers and tax advice are all there is more potential to get up.