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Owner Builder Loans

Discussion in 'Property Finance' started by DrewOB, 30th Jan, 2016.

  1. DrewOB

    DrewOB New Member

    Joined:
    30th Jan, 2016
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    3
    Location:
    Sydney
    Good Morning Everyone!

    I am looking at doing an Owner Build in SW Sydney and have recently been in contact with my broker who has said that ANZ will only borrow 80% of the land value - which was valued at a conservative 525k (with recent sales, I believe it's more to the 600k). This only leaves us with 420k to build, although it is a lot, I don't believe it will be enough for the build considering we had quotes of 550 - 600k for builders to undertake.

    At the moment we have a 340k loan on the block with 340k sitting in the offset. We are hoping to at least get a limit of 550k, we are still getting a lot of our quotes for the build but in total I am hoping to build for under 500k - mainly because I have access to my own machinery and trades (plumber/bricky) to help save a lot of costs.

    Although our block is sloping, it has very nice views. Similar sized blocks <1km away with no views and 10 year old homes have been selling for $1.1 - 1.3mill. So once built, I would be hoping for a valuation of $950,000 - $1mill at a minimum.

    Could anyone suggest either a bank that I should approach to talk about the OB loan or a broker located in South West Sydney (Camden / Picton / Narellan) that might specialise in this area?

    Thanks in Advance for the help!
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    He should have said 'lend' (not borrow) unless you will be loaning ANZ money?

    Owner builder loans are generally not available because of the extra risks and problems involved.

    St G is one lender who used to do them.

    If you have other property you could also borrow against that for the build and then against the land of this one as well.
     
  3. DrewOB

    DrewOB New Member

    Joined:
    30th Jan, 2016
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    Location:
    Sydney
    Thankyou for the reply Terry.

    Unfortunately, no other property to loan against on this one. This is our only piece of land at the moment. At the end of the day, I could probably build the house for 420k but not at the quality I would like it to be built.
     
  4. Kinnon Bell

    Kinnon Bell Finance Broker

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    14th Jun, 2015
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    Location:
    Cairns
    Are you a licenced builder yourself or just looking to project manage the build? If you're a licenced builder you may have a couple of options but banks really don't like owner builders.

    Out of curiosity, what are you hoping to achieve by building it yourself?
     
  5. tobe

    tobe Well-Known Member

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    Location:
    Melbourne
    If your not a licensed builder, a percentage of the land value is the best you can hope for.

    Get a couple of valuations, they may vary. If you can get the build to Certificate of occupancy, you can then borrow against the increased value to finish the landscaping, and other bits and pieces.
     
  6. DrewOB

    DrewOB New Member

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    30th Jan, 2016
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    Location:
    Sydney
    Thanks for the help. Will look further into it. I contacted NAB today who informed me that they can do valuation off projected value. Will talk to them more on Monday.

    The reason I want to do owner build is because I know I can build a better quality home with better finishings for the same or less then a Builder. I have a wealth of knowledge around me to help so why not.
     
  7. Skilled_Migrant

    Skilled_Migrant Well-Known Member

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    Location:
    Melbourne
    1. Try Bank of Melbourne for owner builder loans. They will require a detailed estimate (preferably from professional estimators) of constructions costs as a part of application.
    2. ME bank claim to provide owner builder loans 'they even have a form for owner builder application' but only provide loans for completion after lock up stage.
     
  8. Skilled_Migrant

    Skilled_Migrant Well-Known Member

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    Location:
    Melbourne
    Let's see some of the reasons for owner builders even though banks shun them:
    • Cost savings: Cost savings usually come as a trade-off against lost time (I cannot emphasize this enough)
      • Trades:Tradies knock off at least 10% for cash in hand.
      • Builder's commission: Approx 20-30% less than the builder.
      • Materials: Gumtree, auctions, salvage yards and construction left overs can have significant savings.
      • Economical (free) utilization of accessible skills (own, relatives and mates).
      • Legal freebie: In victoria atleast, you can get an owner builder permit every 3 years, so theoretically, between a couple 2 residences can be constructed every 3 years without paying builder's overheads.
    • Greater Control: Already addressed by OP.
    • Flexibility: You can always revert to a builder if your situation or mood changes. Not so easy the other way around.
    • Risk Mitigation: (Bear with me on this one) Since the work is fragmented into a sequence of specialized activities/trades, the risk to equity is greatly reduced as against hiring a single builder. E.g. a plumber did a runner on me and I ended up approx 1200 out of pocket. A mate ran into disagreement (cost escalation in slab) with his builder, case is under mediation and his 50,000 advance paid to the builder is in limbo. No progress for more than 6 months as builder is playing hard ball.
    • Experience: This is great way to gain experience (make mistakes) as the risk has been sequestered into small manageable parcels. It can be a valuable addition to your resume before going for a builder's license.
    • Utilization of time: People with time (and backyard) to spare can find owner building an extremely rewarding use of time
    • Enjoyment: I received lot of help and advice from a retired builder. Although he is almost 80 years old and has multiple income streams from commercial and residential investment, he still actively constructs (7-4 daily, sometimes even on Saturdays) on behalf of his family member (owner builders).
     
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