Lenders on 4 dwelling development

Hi guys,

As per above any lenders that would fund on 4 all in one line development, on 90lvr?

 

Nope. But Rams might do 80%.

 

Rams do 4 on one title? Are they the onpy ones to go beyond 3 on one title?

 

From memory heritage and bankwest werent too bad with multiple units on one title, but its not my area.

@Shahin_Afarin is the man to speak to here.

 

Bingo - Bankwest aren't too bad with this - servicing is average but rates are reasonable at the same time.

They're going to want to look at it at 80% however and as always with inline vals, keep a buffer for inevitable val shortfalls.

 

+1 for
@Shahin_Afarin

 

@Corey Batt thanks for this. By 'inline' vals are you referring to the concept that (typically) the (usually much lower!) valuation of the block as 'one' property is always taken by the bank as opposed to how it might value (which is usually much higher) as say 3 or 4 separate dwellings?

I.e. lets say a 3-pack on one title is available for sale for say $500k. If they were separately strata-titled and then sold off (and as such, valued individually) they might value at say $250k each (meaning a $750k valuation all up).

Are you saying the lender only takes that $500k group-value as opposed to the 750k individually-counted 'total' value?

 

I'm not a broker but last I heard Heritage had dropped the LVR to 70 on their product which allowed 4 in one line.

At the end of the day it may actually be more prudent to go with a commercial loan product that might have a LVR of 65 but it's an LVR on end values not a in one line valuation

However I don't think anything will really get you close to 90% lend.

To get the rates you want @klabat you may need to consider doing the subdivision first so that you then have the 4 titles and each would be a single loan on it's own merit and you might then get close to 90.

Again, I'm not a broker, I'm just throwing out wild ideas that I would consider and investigate if I had an awesome 4 unit project that I wanted to do.

 

could any brokers out there verify if that can be done @Westminster

 

Subdivide first before constructing? You would need to consult a town planner or a lawyer specialising in this area. It is generally more difficult to do.

 

In some states it's easier than others. I don't know what state the project you are thinking about is.

In WA it's called a survey strata subdivision and it has an approvals process that takes around 90 days.

 

The other option is to stage the development. Build first 1, 2, 3, whatever you can afford with the appropriate buffer. I know someone who did this in Perth. They could not afford to build 4 so they staged it.

 

Just done a survey strata in WA . 59 days for conditional approval

 

Can you get separate building contracts and use more than one lender?

 

It would depend on borrowing capacity and security for the loans. One lender would not like to register a mortgage on title if there is already a mortgage on title registered by a different lender.

 

4 titles with 4 building contracts. One lender finances 2 townhouses each with its own title and another lender the other two?

 

If separate titles no probs

 

No problems that I know of

 

LMI is not going to touch more than 2 units on single title. The big variable in these scenarios is the valuation. Lets look at 2 examples.

Say you are building 4 townhouses with an end valuation of $500k per dwelling so that's an end value of $2mil. Now the "as in one line" valuation is going to come back anywhere between a 20% 35% - discount of the end valuation so thats about $1,300,000 to $1,600,000.

Now lets say Bank A does 90% (which they don't but lets play along) and the valuation comes back at $1.3mil - that will give you a loan amount of $1,170,000 plus some serious LMI fees.

Bank B does only 80% and the valuation comes back at $1.6mil so that will give you $1,280,000.

So Bank B does a lower LVR but has given you a higher valuation - this has resulted in more money and you saving on the LMI.

In terms of lenders doing 4 unit construction - Bankwest is probably the worst option in terms of servicing and overall policy set.

The best lenders are CUA and RAMS for 4 unit construction - I think the RAMS product is far superior. I say this based on (a) their servicing calculator and (b) their overall policy set.

Brokers can't write RAMS loans so a lot will not recommend it, some don't know RAMS do this (ironically a lot of people at RAMS don't know this niche either) or don't want to use it because they receive a marginal referral payment from RAMS.

Hope this helps but the valuation plays a huge part in these types of scenarios.

Also try and avoid commercial funding and stick to residential funding.

 

Is that the RAMS lo doc or do they also have a full doc 4 on one title product @Shahin_Afarin ?

As you say the thing to concentrate is on WHO will give you money and how much that actually money will be. If you want to do 4 then you don't even consider what the interest rate will be - just suck up whatever it is