I'm a bit of a procrastinator. I figure if I write it down here it might actually make me take some action!
Background
My partner and I have just finished a project that involved building two rear houses (behind two existing rentals that we had). Both properties had tenants move in the day we got the keys. The process went surprisingly smoothly and now we're keen to develop a five unit site we hold in Gosnells. It currently has a rented 4 x 1 house on it.
We have a quote for the five unit build from the builder we just used. Because we had a good experience with them, we're keen to engage them again. We've approached Westpac (our current bank) for finance, who have dragged their feet and finally told us the finance would be under commercial rates (commercial is > 2 units under their rules) and we would need pre-sales to cover the entire borrowing amount and even then, they may not lend to us due to our lack of commercial building experience.
I think we should consider using a broker, but my partner is admimant that we don't due to a bad experience with the previous broker we used. The deal they brokered was no better than the deal we secured for ourselves, and my partner really struggled with having to deal with them for loan issues and money releases instead of directly with the bank. Plus they didn't give us any options for avoiding x-coll (actually they pushed that way without exploring any other options).
We're also ready to re-finaince our existing portfolio (one last loan about to come out of a fixed rate) and potentially move banks to get out of the x-coll arrangment we're currently in (1 x ppor, 5 x IPs). (ps. Thanks Rolf for info on x-coll you've provided on this forum)
Is it true that if we use a broker to setup our loans, then we can no longer talk directly to the bank for the life of the loans and have to liase through the broker?
To move forward, my plan of action is as follows...
Plan of Action
1) Submit the subdivision applications for our previous builds
I simply haven't done the paperwork. I understand it should take about 5 months to complete
2) Start the process of refinancing our existing portfolio to undo x-coll and also see if we can get better rates.
Approach a couple of banks...assume if we move all our loans to the same bank will get a better deal. May be complicated as front old houses on recently developed blocks probably now have negative equity. May sell later in the year, but not now.
3) Setup a spreadsheet to work out if the deal is even worth it (I understand we should be aiming for a minimum 20% profit).
Although, I don't know how to work this out since we already own the land and we'd like to keep as many as possible for long term rentals. I also have a tendancy to get caught up in 'analysis paralysis' which drives my partner crazy. And of course there are so many scenarios (i.e. hold vs sell, pre-sales or not, build 4 instead of 5 etc...)
4) Take our preferred scenario to a couple of banks to get an indication of if and how they would finance the deal.
5) If dissatisfied with outcome of step 4, convince partner to use a broker.
Issues
I'm slightly concerned that if we do the bank negotiations ourselves we may not get the best structuring of loans and if we get knocked back for finance along the way it will affect our credit rating.
Background
My partner and I have just finished a project that involved building two rear houses (behind two existing rentals that we had). Both properties had tenants move in the day we got the keys. The process went surprisingly smoothly and now we're keen to develop a five unit site we hold in Gosnells. It currently has a rented 4 x 1 house on it.
We have a quote for the five unit build from the builder we just used. Because we had a good experience with them, we're keen to engage them again. We've approached Westpac (our current bank) for finance, who have dragged their feet and finally told us the finance would be under commercial rates (commercial is > 2 units under their rules) and we would need pre-sales to cover the entire borrowing amount and even then, they may not lend to us due to our lack of commercial building experience.
I think we should consider using a broker, but my partner is admimant that we don't due to a bad experience with the previous broker we used. The deal they brokered was no better than the deal we secured for ourselves, and my partner really struggled with having to deal with them for loan issues and money releases instead of directly with the bank. Plus they didn't give us any options for avoiding x-coll (actually they pushed that way without exploring any other options).
We're also ready to re-finaince our existing portfolio (one last loan about to come out of a fixed rate) and potentially move banks to get out of the x-coll arrangment we're currently in (1 x ppor, 5 x IPs). (ps. Thanks Rolf for info on x-coll you've provided on this forum)
Is it true that if we use a broker to setup our loans, then we can no longer talk directly to the bank for the life of the loans and have to liase through the broker?
To move forward, my plan of action is as follows...
Plan of Action
1) Submit the subdivision applications for our previous builds
I simply haven't done the paperwork. I understand it should take about 5 months to complete
2) Start the process of refinancing our existing portfolio to undo x-coll and also see if we can get better rates.
Approach a couple of banks...assume if we move all our loans to the same bank will get a better deal. May be complicated as front old houses on recently developed blocks probably now have negative equity. May sell later in the year, but not now.
3) Setup a spreadsheet to work out if the deal is even worth it (I understand we should be aiming for a minimum 20% profit).
Although, I don't know how to work this out since we already own the land and we'd like to keep as many as possible for long term rentals. I also have a tendancy to get caught up in 'analysis paralysis' which drives my partner crazy. And of course there are so many scenarios (i.e. hold vs sell, pre-sales or not, build 4 instead of 5 etc...)
4) Take our preferred scenario to a couple of banks to get an indication of if and how they would finance the deal.
5) If dissatisfied with outcome of step 4, convince partner to use a broker.
Issues
I'm slightly concerned that if we do the bank negotiations ourselves we may not get the best structuring of loans and if we get knocked back for finance along the way it will affect our credit rating.
