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Loan for a multi unit development?

Discussion in 'Property Finance' started by Eddy89, 4th Nov, 2015.

  1. Eddy89

    Eddy89 Member

    Joined:
    4th Nov, 2015
    Posts:
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    Location:
    Melbourne
    Hi all,

    Im new to the forum as well as new to the industry.

    A quick background storey, recently became a registered builder and have finished school as a building surveyor also.
    We are currently working on a 3 townhouse site in Melbourne's South East, however this project will be my brothers home, my home and the third townhouse we will sell off to help pay back a bit of the loan.
    My brother and I got the land of our parents for VERY cheap and has made the process of getting a loan much easier.
    I am now thinking about the next project I want to start, I have built a number of homes and have a lot of family members in the building industry so I know an approx. amount of money I have to borrow. However, I have some question that have been playing with my mind over the last couple of months, if anyone could help me it would be greatly appreciated.

    Getting a loan for land, build cost, misc etc. at a total of just say $1.3mil, without a deposit is it possible? On an average wage.
    The only reason I am asking is because I know for our project we are currently doing the loan is under my parents, myself and my brothers name, and a deposit was not needed, however, I am not sure as to why we didn't have to pay a deposit as I was not present at the time of applying for the loan.

    I have a project in mind that I know I could make a good profit on, however I have no cash in the bank and cannot put a deposit down, however I will have approx. $200k equity once this current project is finished.

    Any advice/help would be much appreciated.

    Thanks in advance,

    Eddy
     
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Location:
    Gold Coast
    Typically, 3 units on one title initially will be the "borderline" with a few lenders under standard resi terms....

    Rare couple will do 4, but not at the 90 % you will need

    Youd likely need a 90 % lend if you can get at the equity from the project thats jointly owned = hopefully there is an exit strategy there to sell or split the asset


    ta
    rolf
     
  3. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Location:
    Perth WA
    The reason you could build the TH's with no deposit is due to the equity in the land. You won't have that in your next site, so you'll need to access equity from another source but it will depend completely upon your income and expenses - including the loan you hold for the TH's.

    If that loan is still in 3 names on completion, you'll be viewed by most lenders as liable for that whole debt so that will effect your borrowing capacity quite dramatically.
     
  4. Eddy89

    Eddy89 Member

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    Location:
    Melbourne
    Thanks for the reply. makes sense yes..
    No once this current project is finished the loan will be separated into the 3 names and won't be together.
     
  5. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
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    Location:
    Gold Coast
    so u will all have your separate titles to each property ?

    ta
    rolf
     
  6. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    13th Jun, 2015
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    Location:
    Perth
    You may not have needed a deposit because someone put up a property as security or the land had enough equity in it to make the project meet the Loan to Value Ratio (LVR)

    I would strongly recommend contacting one of the brokers on here to learn how development finance works. Structure and finance are a key component to a successful development.

    Peter Tersteeg is a local Melbournite and can probably assist.
     
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