Questions on Developing with Family

Hey All,

Apologies if this isn't the correct place to post this!

A couple of family members and I have been interested in residential development for quite some time (small lot subdivisions, knockdown rebuilds etc) but we haven't really found ourselves in the position to do so until recently...We each have a PPOR and can contribute around ~$125k each towards a project so we feel like could be in a position to take on a project together. Worth noting that two of us can contribute up to $200k if required.

My questions are:

• Which types of company structures should we consider?
• What would lenders be looking at with regards to borrowing power and serviceability?

We know we need to eventually engage a lawyer and accountant for specific advice however, I thought it would be fun to see what everyone's opinions are given the wealth of knowledge on this forum!

Cheers,

 

I’m an amateur not a lawyer or accountant.

There are heaps of ways to structure this but ultimately I think you will find the whole thing way too hard to do “properly”

The capital you can each contribute is only a part of the puzzle. If you are all 4 shareholders and directors, bank will likely investigate full servicing on everyone. 2 households will be ok but the deal will fall apart with 3 or 4, not to mention the headache of pulling together financials.

One other thing to consider, sure resi development is the dream but tbh you will be jumping into the tank with professionals. Developers that buy the small lots weeks before you even hear about them, and builders that work for less margin and have their own crews to bring product to market ASAP.

Assuming you are in Brisbane, there are some huge huge results in the knockdown rebuild game at the moment, but they have all been ultra polished product from professional builders. You would be at least 18 months away from bringing saleable product to market.

also there is the risk of oversupply. Drive around camp hill and there in an excavator or scaffold on every block. The builder that broke the wavell heights record has 3 more on the go in the same suburb.

 

all great things to consider! Thank you.

yes from Brisbane, we actually live close to camp hill so I can see your point of view regarding knock down rebuilds. Certainly some amazing products coming to market!

just sent you a DM

cheers

 

Finance is a big thing - whoever is on title will need to be on the loan and thus servicing will be calculated on the aggregate income and liability position.

You may find that one or more parties will weigh down your overall servicing position and this may dictate who you involve in the transaction.

 

The latter.

The cash would be used for a deposit for the loans to purchase/ construct etc and i believe we need some left over for the soft costs. Realistically for the first project, probably wont take on a knock down rebuild but would like to eventually. Hoping to start off with a subdivision (easier said than done)!

 

Good to know! thank you