Buying Development Block, Cash vs Lending?

[JCM]

Hi all,

I am cashed up and ready to purchase a development site and am wanting to know which will give the best long term benefits if I am to continue developing. Would it be buying the property cash and then borrowing for the construction loan later or borrow to purchase the site and also for the construction phase?

I have $450K cash from the recent sale of an IP and I also have $250K in my PPOR which I plan to sell and rent thus releasing more cash.

The development sites that I have been looking at range are around the $420-$450K. Would it be wiser to buy the property outright then borrow against it for the construction costs or put down the minimum on the property purchase?

Also I am not working.................studying!

Thanks Everyone for your Input!!!

 

[Shaneelastic]

Hi all,

I am cashed up and ready to purchase a development site and am wanting to know which will give the best long term benefits if I am to continue developing. Would it be buying the property cash and then borrowing for the construction loan later or borrow to purchase the site and also for the construction phase?

I have $450K cash from the recent sale of an IP and I also have $250K in my PPOR which I plan to sell and rent thus releasing more cash.

The development sites that I have been looking at range are around the $420-$450K. Would it be wiser to buy the property outright then borrow against it for the construction costs or put down the minimum on the property purchase?

Also I am not working.................studying!

Thanks Everyone for your Input!!!

you need to leave a cash buffer for yourself, so a combination of debt/equity would suffice, also need cash to pay for the costs involved.

what area are you looking?

 

[Aaron_C]

I think it depends...generally I would rather borrow as much as possible for anything, whether it be for a development site or a normal property. But having that large cash buffer is good because it means you have less borrowings when it comes to construction finance.

 

[BMan]

borrow what you can and put the rest into an offset account
always try to borrow the maximum you can as its tax deductible and only use your cash when you have to
also helps getting across the line if they only let you borrow so much

 

[JCM]

Thanks for replies everyone!!

I guess there are many options all depending on each individuals circumstances, and the one that will affect my borrowings is the fact that I will not be able to show income. This means that I will have to pay higher interest rates on my borrowings as traditional lenders won't even consider me.

Regards
JCM