Capital rich (relatively) but income poor

Greetings,

I am in a position of having some capital but not being able to show income for the last 2 years.

What are my options in terms of getting a property investment loan?

Are there any lowdoc lenders in Victoria?

My plan is to buy a property in Melbourne, subdivide and build 2-3 town houses to sell, and repeat.

I estimate that for my first time I will be able to provide half the total cost of buy/build, and the lender to provide the other half.

Or it can be that I buy the property and get a loan to subdivide/develop.

Any advice from 'old hands' out there would be greatly appreciated.
 
If you've got no income, you're not going to get a loan. A strong capital position isn't going to pay a mortgage. This comes from a legal requirement since 2011 lenders are required to verify sufficient income to meet mortgage repayment.

You won't qualify for a lo doc loan if you're not self employed. A lo doc loan still requires you to demonstrate enough income to afford the loan, only the way this is done is different. The first critiera tends to be having an active ABN for 2 or more years, the second criteria is usually showing income via 12 months of bank trading statements or BAS receipts from the ATO. You can't generate these unless you are genuinely self employed for a significant period of time.

To earn an income you probably need to go back to work in some capacity. In many respects this could be a good opportunity to start a new career, create a business or something else. I was retrenched from my last IT job. It was difficult at the time but today I'm glad for the opportunity it gave me.

An alternate solution may be to not have to qualify for a loan yourself. If you've got a lot of cash, work with someone else in a joint venture. They provide the loan, you provide the cash.
 
Peter Tersteeg, thanks for your reply. What you said about loan requirements is about what I expected, saddly.

It is an odd situation when you have reasonable capital, yet can't get a loan.

Your advice about getting into another form of business is my plan B - I anticipate generating income for 2 years to then qualify for a loan.

I just want to make sure that there is no other viable way to get into property development at this time.

A private loan is plan C...
 
yc1 you are not likely to get traditional finance and normal resi rates as Peter has outlined.

But don't let the stop you searching.

You are looking for an asset lend basically which will be more expensive.
 
If a company would be doing the borrowing then the loan would not fall under the NCCP and you would have less of a burden trying to justify borrowing capacity. A low doc may work in such situations.
 
I just want to make sure that there is no other viable way to get into property development at this time.

A private loan is plan C...

There are plenty of other ways.

You could team up with someone who has an income for example.
 
I have been told I cannot get a loan, hubby not working, me working casual.

We are the typical asset rich, cash poor types.

I am transferring an unencumbered house, value $700K, into my name (or, a trust and my name combination to minimise land tax), and want to get a loan using this house as security. This house will give me income and we have other rent coming in, distributions from a trust, and I get my casual wage. We've managed like this for five years now, and really only two years with trust distributions, so I know we can manage easily.

One broker said "no", another said "maybe" and another has said that using my ABN, we can get a type of asset lend, probably from Adelaide Bank (?) at a similar rate to normal lending, not a stupid high interest rate.

I'll be going for this in the next month, once I get clear title, so happy to report back.

Same broker told me a couple of years ago that I could use a loan we already have to build two townhouses, get an asset lend on the completed two to pull out the equity to build the other two.

This may or may not be possible now, but we have probably a year to think about this, think about whether we actually do the build or sell the block with the DA (about to be lodged any day now).

We've got other fish to fry before we even think about the townhouse build.
 
Terry_w, willy1111, wylie, thank you for your responses.

I do have a registered company, but for the same reasons as for myself it cannot show any income for the last 2 years.

What I am looking for is a progressive development loan, I guess, which will be secured by the purchased property and repaid upon completion and sale - about 18-24 months.

As I will probably be borrowing less than 50% of the total investment, the pre-development property value should be enough to give the lender security.

Are there any lenders out there that would agree to this?
 
Hi

Hello,

As of late i am seeing two things have!!
1) Some one income rich but not asset rich eg; not having enough deposit to buy a property.
2) Assets Rich but income poor.
 
Hello,

As of late i am seeing two things have!!
1) Some one income rich but not asset rich eg; not having enough deposit to buy a property.
2) Assets Rich but income poor.

People who are asset rich like to borrow against those assets to help acquire more. They start to run out of income to service the debt.

If you're income rich it's probably because you don't have any debt and likely to have few assets as a result.

Those fortunate enough to be income and asset rich have usually been investing for a long time. Even they had to start somewhere.
 
as your looking to develop and sell you should be able to get a commercial development loan. its usually for a much shorter term, at a higher interest rate, and would most likely require a background in development and pre sales.

Finding a jv partner who has done development in the past may be the best way to go. give up a portion of the profit for invaluable experience which you can use the next time to get development finance on your own.
 
Back
Top