Deposit on regional commercial property

B

Belu

Hi all,

Here are the details:

Price: ~$500k
Zone: B1Z
Location: Large regional centre
Building area: 120sqm
Land area: 200sqm

Only overlay is design and development as it is in the local CBD.

Looking at options of buying it and occupying myself it for business uses. Will most likely be different legal entities - i.e. 1 pty ltd owns it and leases it to 2 pty ltd but 1 and 2 are owned by me.

So just wondering what sort of % deposit I could get away with here please? The monthly payments arnt an issue but the upfront being as little as possible would be nice! Can I get 75% lend in this situation please?

Thanks

Ben
 
Hi Ben,

Is it currently leased out? If you are going to lease it to yourself banks will give you a lower value due to the related party nature of the transaction. They may also lower the LVR that they will lend. But generally with commercial properties, the higher the LVR, the higher the interest rate...
 
I see. Maybe if you PM me the details I can look into it for you. Thing with commercial finance is that it is far more flexible than residential - it isn't your typical cookie-cutter model.
 
Negotiate the price subject to finance for 14 days.
Get what you can from the bank, lets say 60%. then go to the vendor and tell him/her that you require vendor finance for 20% at 7% interest for 24 months otherwise you will not be able to proceed. They get a second mortgage and a caveat to secure the debit. The vendor will be emotionally committed to the sale which will give you the upper hand in the negotiation. If you get the 24 months you should be able to have it revalued for 20% more in 2 years.
Easy. Go hard buy two.
 
Your other option is to load the purchase price by 20% have your solicitor prepare a collateral agreement which is "separate to the contract of sale" that reads something like this. " The vendor agrees to refund to the purchaser 20% of the sale price if the settlement is provided within 30 days instead of the 120 days allowed within the contract of sale"
Banks do not like it, but is legal, mortgagee brokers don't care about it and don’t want to know about it, Valurers like to keep everyone happy and provide valuations at contract price. If the actual sales price is declared in the stamp duty declaration the bank will know about it after settlement. The bank will be covered by the valuation. Or pay the extra stamp duty. Easy buy three
 
Michael A said:
Your other option is to load the purchase price by 20% have your solicitor prepare a collateral agreement which is "separate to the contract of sale" that reads something like this. " The vendor agrees to refund to the purchaser 20% of the sale price if the settlement is provided within 30 days instead of the 120 days allowed within the contract of sale"
Banks do not like it, but is legal, mortgagee brokers don't care about it and don’t want to know about it, Valurers like to keep everyone happy and provide valuations at contract price. If the actual sales price is declared in the stamp duty declaration the bank will know about it after settlement. The bank will be covered by the valuation. Or pay the extra stamp duty. Easy buy three
Click to expand...

beg to differ :(

It is legal where it is written into the purchase contract or the parallel agreement is provided, and a lender or valuer has been afforded the capacity to assess the material facts. If the lender ignores same, thats their business.

Most brokers (once aware) will provide disclosure and hence the valuer will value accordingly.

Henry Kaye made the "contract stack" a ma n pa smoke and mirrors deal.

ta

rolf
 
Rolf
My legal advice says otherwise. If the discount being applied is appropriate for the consideration then this approach is legitimate and acceptable. Seek your own legal opinion.
If you know the market well and can find deals 20% below the market price then you should be able to borrow 100% like a developer who creates a 30% margin often can.
This is rarely the case for straight forward purchases because of the instruction the banks give the valuers which is to value the property at "contract price or less" The only real variations to this is if the settlement is 12 mths or more, or you have gained early access and undertaken capital improvements.
The whole process would be more transparent if the banks did not provide the valuers the contract of sale at all. Then the purchaser could provide compatibles to support the real value rather than examples to justify the contract of sales price. "hence the valuer will value accordingly" not just to contract price or less.
 
Michael A said:
Your other option is to load the purchase price by 20% have your solicitor prepare a collateral agreement which is "separate to the contract of sale" that reads something like this. " The vendor agrees to refund to the purchaser 20% of the sale price if the settlement is provided within 30 days instead of the 120 days allowed within the contract of sale"
Banks do not like it, but is legal, mortgagee brokers don't care about it and don’t want to know about it, Valurers like to keep everyone happy and provide valuations at contract price. If the actual sales price is declared in the stamp duty declaration the bank will know about it after settlement. The bank will be covered by the valuation. Or pay the extra stamp duty. Easy buy three
Click to expand...

A few years ago the Law Society warned lawyers against getting involved in this sorts of deals. I forget the reasoning now, but would suspect it could involve assisting in a financial deception.
 
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