Private investor for property purchase - 3 year term (help)

Hey Everyone,

Firstly, love this forum and reading everyone’s questions! Such a good way to learn information and connect!

My question relates to a property purchase in NSW. I’m wondering where i would go to seek a private investor for the purchase of a property on a 3 year term (loan secured against the home). Loan amount of $3 million with an agreed interest rate of return calculated annually. I am receiving a large amount of cash from my mothers estate ($7 million) in 3 years (hence the loan term) and am wanting to purchase an exclusive property I’ve found however cant lend it through the bank due to the figure (my income technically wouldn’t service a typical mortgage of this amount/scale due to the banks lending criteria etc) otherwise obviously i would just obtain a 30 year mortgage and pay it out early once i receive my mothers estate. I don’t want to lose the property and thought this would be a good option if something like this is available. It would be a win win on both sides - investor gets a good return - i get the exact property I’m after and dont mind paying a premium for it as it would be absorbed in the increasing value of the home over my lifetime.

While i appreciate personal opinions, I’m honestly just seeing if there’s anything like this available in Australia. Any help is much appreciated. Thanks!

 

What is your deposit you have ?
What is the net yield of the property?
Can you get an advance from the $7m now ?

 

Hey Beano,
Thanks for the reply.

- Secured deposit available - around $500k
- net yield i assume would be tailored to the individual investors wants/needs but i would certainly estimate it to be far greater than current average home loan rates
- unable to obtain an advance - have enquired

I guess the reason for seeking this arrangement is the property to be purchased is quite unique and exactly what I’m after. If the property wasn’t available i would obviously wait. Thanks again.

 

Interested in the legal aspects.
What if the executor decides not to distribute to you, or just keep running the estate, or distribute to a trust of which you are a beneficiary but not the trustee?
What if there is a challenge to the will?
Can any legal caveat be lodged on expected but not legally enforceable future assets?

op, how much would you consider to be too high an interest rate? Given that normal mortgage is about 2%, personal loan maybe 6%, credit card rate 20%?

 

Hey Trainee,
Thanks for commenting.

The estate/will was finalised a little while ago and the $7m was my distributed share. Similar to how a child has inherited funds that aren’t distributed until they turn 18 (for example). So the risk of contested wills, trustee issues and the like are non existent.
Regarding the caveat over future assets, I’m sure there is something that could be drawn up, however the funds are secured against property so effectively is not a “cash” loan.

lastly regarding percentage interest rate, I would assume something of this type of investment and risk the percentage would be around 9%-25%. Anything above this wouldn’t be viable and would be an unrealistic return to an investor in my opinion.

thanks!

 

It might be secured but you are asking for 90% LVR (3m property with 500k deposit). With a normal bank loan LMI would apply.

The will states you can't inherit until you are 30?

 

Long shot I guess (as it depends a lot on the vendors position), but have you considered offering the vendor some form of option to purchase in 3 years? Could include a premium on the price and upfront deposit released to them now...

 

That’s correct Trainee

And thanks Joseph, I did consider this, however the vendor needs the funds to complete their new home purchase. Definitely crossed my mind!

 

@Richard Taylor

 

On the legal side 2 potential options
a) borrow from the trustee
b) make a family provision claim (would likely be successful if it went to court, but no need to go that far probably)

either would be cheaper than paying $900,000 in interest over 3 years.

 

Awesome! Thanks for the reply

 

Can i ask what type of property this is? Is it commercial or purely residential? Edit: just re-read the post. So you wouldnt have the cashflow to service the loan monthly for the next three years? And payments would be made yearly or simply paid out in three years with total interest applied? i think its possible for you to find an alternative funder, but id say it will be very difficult to say they wont get anything back until three years... they would need to cover cost of capital, monitoring fee, etc. maybe that could be covered by deposit if there is anything left over. They may want <75% lvr off the bat
Cheers

 

Hey Ketsle,

Thankyou for the message. The property is purely residential and in a high growth area. And yes, can definitely service the loan depending on what terms were agreed to on the investment. Thanks again!

 

Say it was 3m and 12% interest.
How will you service this?

 

Hey Trainee,

Understand your point. If the loan were serviced over the term, although i have the ability to, this would have to be negotiated with the investor as the interest rate is reflected in the very short “loan” term. Obviously it isn’t viable if say the interest rate was 20% paying tens of thousands in weekly payments over 3 years.

I guess everything depends on the structure, deposit, interest rate etc. definitely a unique investment.

Thanks!

 

Lenders generally do not like unique properties .
They like properties that have general appeal that can be easily realised.

 

And produce substantable income

 

Even at 10% on 3m, thats 300k a year interest. How will you service this?

If you have that sort of income, why cant you get a loan for this?

 

Thanks Beano,

The property is located in one of the fastest growing regional areas in Australia. There is currently massive development and house prices grew last year. I guess this would be more appealing given the property itself is unique.

And thanks Trainee, i understand the points your making. If you’re interested please PM me and we can chat further. Thanks

 

La Trobe might be able to help with this sort of thing.

The tricky part might be the 90% LVR. I recon Terry's suggestion of borrowing from the trustee etc is likely to be the easiest and most cost effective.