Next Crisis ...

There are hundreds of reasons why.
It’s pretty common knowledge in the industry and throughout all the media.
Here is one billionaire paying 22%pa.
Grocon takes $40m loan to finance Barangaroo venture

 

0%

 

I think I have heard a similar thing perhaps called mezzanine funding.

Henry Kaye use to talk about it.

Some developers may source bank funding for the majority of the devevelopment, say 60%, 30% may come from own funds or investors and then a small porportion maybe 10% comes from mezzanine funding at a highish rate like double digits.

Obviously lending to developers is more risky in most lenders eyes so private funding around 12% seems reasonable.

 

Because banks think it's not worth risking the capital even for 12%

 

No mezzanine funding is dangerous and I wouldn’t do it ever. It is a second mortgage with a nice name. These are mainly developers with millions or billions they have purchased the property outright. But can’t fund the development. They need usually 50-60% of land value for development costs. They don’t want to pay a setup fee or wait weeks in for a decision. 12% is cheap development finance atm.

 

LOL. You really don’t understand high level finance for international corporations since the APRA BS do you. These loans are not to mums and dads doing 3-5 million developments. One is $7.5 mil on a 39 lot subdivision being part of a 945 lot subdivision by a $AUD 6.7 billion company.

 

My gut tells me that in 2 to 3 years we will have a crash. Lots of factors, the fed desires to pay down debt, rates will rise. Instability in Europe, trade war, & possible tech bubble NASDAQ all potential catalysts. In Australia banks will eventually need to pass on costs due to bonds going up and rate hikes from the STATES. If Labour gains enough power then tax changes to bring housing market down further.... who really knows but I'm 3/4 cash and 1/4 shares. If we operated in a bubble then I'd suggest we'd just have a major housing correction such as a 20% drop. Employment is good, companies doing well etc.....It's the big players in the global market that will bring us down......lol, perhaps I will laugh at myself 3 years from now but this is what my gut is telling me so I will listen to it....

 

We once had a client on the risk watchlist who was landbanking on speculative vacant lots by Jordan Springs/Cranebrook way paying, get this... 40%-60% p.a. floating rate to private lenders... without telling the bank.

(wags finger) "naughty, naughty"

Exited them out pronto

Hope they got the rezoning they were waiting for...

 

That is very conservative. So why?
I’m about 35% RE which is the lowest in my 39 years of investing.

 

I am looking to re-enter into RE early next year. I am considering DCA into stocks and debt recycle. I'm still considering my options. I'm happy with 3% return on cash given housing prices and stocks continue to fall......

 

I’m getting 10% secured on my cash, but am still offering on properties where I see a profit in a 3 year timetable.

 

How?!

 

I’ve mentioned it in other posts. I lend to land developers a first mortgage for 60% of market value.
Conditions are only within 30 mins drive
1st mortgage only
60%lvr
No more than 12 months unless they pay monthly interest
Not for construction only for subdivision
All solicitors do it.

 

That's an amazing return.

 

Im still a lot cheaper than competitors like balmain finance.
They’re on about 14% at the moment. The only problem is that like everyone I have limited funds and can’t legally pool others money to make up more loans.
But I currently have a waiting list of over $40 million for clients over the next two years.
As the loans are to corporations and not for residential purposes you don’t need a credit license and in effect you become the finance company lending your own money.

 

Mate who gets served first of these corporations go bust? I’m assuming banks first then you fight for what’s left over. Great returns

 

I think Car tart is the bank in this case as he is first mortgage

 

Hi @Jess Peletier Since your post, DOW down over 2000pts, All Ords down 340pts etc.
Done any buying?
I am today.

Do you think it will go lower in general or sideways for an extended period (my thoughts are sideways)

 

I haven't done any buying yet - I'm waiting for one of two things - either a massive crash ala GFC/1987/techwreck, or further gradual falls and a change of trend with a decent base formed. I'm in no rush.