Evening all, not sure if this belongs in renos and mgmt or if this section will do fine. Just wanted to put the feelers out there to see if any of you have experience with strata finance, what those experiences have been and whether there are any tips or traps to be aware of when considering borrowing as a body corp. All lot holders seem to be in agreement that this is the path they are looking to go down instead of a nearly 5 figure special levy for major works. What I know: Interest rates suck. Extra repayments can be made. What I don't know: Will this have any real impact on the sale of the property if there is still a strata loan hanging over the body corp? If any of you have experiences to share I'd love to hear them.
Is it in qld? How many units? How long had body corp been around? Is it doing ok financially? (I.e. receiving all the owners fees on time and not have too high ongoing expenditure) In the strata schemes I've been involved in, selling isn't really an issue since the debt is not attached to individuals but the BC which is a separate entity. Savvy buyers will review the BC financials, and it'll show up on the P&L and Balance Sheet, but shouldn't scare any away if numbers are healthy.
I know nothing of strata corps borrowing, but will personal guarantees be needed? And would those individuals be willing to give one?
No, not needed. Refer Strata Improvement Loans | Calculator | Business Banking | Macquarie as an example product (all of them obviously have slightly different features and policies)
Strata finance is generally last resort. There are no personal guarantees etc required, they take a general charge over the owners corporation assets. The biggest risk is cashflow... many strata schemes have one or more terminally bad payers and the admin fund can deplete, rendering the owners corporation unable to pay the finance repayment.
Apologies for not getting back to this sooner. Yes, QLD. Body corp is 15 years or so old, small block so only 7 lot owners and cash flow looks good. Sinking fund contributions will actually stay the same after the loan repayments. No personal guarantees needed.
Yes, it will definitely have an impact when selling the property and any savvy lawyer should identify this issue before the levies increase. Once the levies are increased to include provision for repayment of the loan in the admin fund you are going to deter a lot of buyers. I don't know the nature of the works but I question why they were not foreseen and the sinking fund set accordingly years ago to avoid this. I do understand things happen and the works may relate to something unpredictable.
It might be different in QLD but in NSW last I dealt with it there was a minimum lot size (for at least one of the lenders, and I've only known 2) - and I think that was 8. There are also restrictions about the amount they'll lend, expressed both as $/lot, and in terms of what the repayment schedule would do to the existing levy contributions. This is a pitfall for buildings that run low levies, with the expectation of having capex externally financed. Even if the building is big enough and the $/lot is below the threshold the lender might decline/limit your loan on the basis that the repayments would increase the Owners payments by too high a %. It's sort of like a stress-test to the loan, determined with reference to existing levies.
Reviving this old thread. Can anyone recommend a Strata finance provider? Complex is in QLD, 16 lots, will prob need $40k.
I'm sure the circumstances justify - but 16 lots raising 40k will destroy resale prices IMHO. though maybe that is a good thing? what's the address?
Yep not good, I'd be ok to go for a special levy and get it done but unlikely that will be approved. The place needs a new roof, so already not great for resale.
We have done a few of them thru our Private Lending Fund but the rates are not cheap. Email me the details of the block and a copy of the last years AGM minutes and I can come back to you with a price etc Cheers
Yes that would be my preference, it may not get across the line in the vote. I want to put forward all options at the next AGM, priority is the new roof for me.
