Finance on smaller block of units

Discussion in 'Property Finance' started by ritchie77, 19th Jun, 2015.

  1. ritchie77

    ritchie77 Member

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    Interested to hear others experience with regard to finance for smaller block of units/dwellings say 3 or 4? I am looking at purchase something like this however have found the major Banks I currently deal with seem to have become stricter.... Problems/queries I have:

    *Rates - able to get resi rates on purchas eof this type or more likely commercial/business?
    *LVR - Looking at 30/40% down whereas previously I found 20% was sufficient with an 80% loan (my Bank has said 20% pok however on commercial lending rates only of upto 5.5%).
    *Servicing - seems ok little changed here so able to claim all rent as income and no sensitising.

    As above, interested on any thoughts, advice or options.
     
  2. Corey Batt

    Corey Batt Finance Broker

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    Can get 90% LVR resi rates with the right lenders. This is to the max of 4 units on 1 title. Have a chat with an investment savvy broker who can guide you with the right lenders, instead of being in the dark. :)
     
  3. Peter_Tersteeg

    Peter_Tersteeg Finance broker/strategist

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    I think you'll find that 3 is still fairly easy with quite a few lenders to 80% or even 90% (in a couple of cases). 4 units can be a bit more restrictive but there are still a decent rate of lenders that can accommodate this at 80% LVR. This is all under their residential policy, so residential rates apply.

    Above 4 units you do start to flirt with commercial lending, so higher rates and lower LVRs. There are some solutions for seriously large blocks of appartments to 75% LVR, but it is commercial so be prepared for rates starting with a '6'.
     
  4. ritchie77

    ritchie77 Member

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    The LVR is not of too much concern for me it is more the rates as I want to avoid commercial rates - ideally I would like to stay with my current Bank as have a very good rate in the low 4's but alas might have to look further afield.. Suggestions of current Banks? (probably not NAB at this stage and excluding my current provider SGB/WPAC).

    With regard to the equity, if I redraw vs current loans will the deposit portion be at current rates with current Bank and the remaining 80% be at the new lenders rates is for example if the unit block cost $1MM and I currently have rates of 4% with existing Bank and the new Bank offers 4.4% the new loan structure would look as follows:

    Deposit at 20% = $200k @ 4% with existing Bank
    New Loan at 80% = $800k @ 4.4% with new Bank
     
  5. ritchie77

    ritchie77 Member

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    Also, current lender said 3 would likely be ok.... More 4 is the issue.
     
  6. Shahin_Afarin

    Shahin_Afarin Finance Broker

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    CBA, St George, RAMS and Bankwest will do 4 units on a single title under residential lending and thus resi rates. You would be looking at rates of circa 4.20'ish depending on the lender.

    Dont do redraw as it may have tax implications. Ensure loans are standalone and separate and properties are not cross securitised.
     
  7. ritchie77

    ritchie77 Member

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    Recent change of Policy at SGB says they will not do 4 units at resi rates, commercial only... Or maybe I was speaking to wrong area?

    Lowish 4's is where I would like to be especially given the $ amount.

    Thanks for heads up on other points. Have never cross colateralised at this point.
     
  8. ritchie77

    ritchie77 Member

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    If I was to purchase a block of say 4 in a trust would this make the lending more difficult? I am thinking Disc trusts should be relatively ok for most lenders however Hybrid trusts? Still not sold on them and not 100% I would use one but interested in others thoughts/advice?
     
  9. Corey Batt

    Corey Batt Finance Broker

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    There's a very small handful of lenders who will even touch HDT's anymore - consider the risk moving forward should this restrict even further.

    Discretionary/Unit trusts on the other hand aren't a problem with most of the lenders.
     
  10. Shahin_Afarin

    Shahin_Afarin Finance Broker

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    St George will do 4 but if you are doing a hybrid trust then you are limited to CBA and St George with varying LVR's.

    What's the LVR that you are trying to do it at?
     
  11. ritchie77

    ritchie77 Member

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    Hi shahin, would like to do 80%....
     
  12. Shahin_Afarin

    Shahin_Afarin Finance Broker

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    CBA is your best option provided that you can service the debt with them.
     
  13. ritchie77

    ritchie77 Member

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    Easy to redraw/revalue with cba down the track if value goes up/renovation?
     
  14. Shahin_Afarin

    Shahin_Afarin Finance Broker

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    Yes but as a general comment its going to be more an more difficult to do equity releases in the future.
     
  15. ritchie77

    ritchie77 Member

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    Also, you said don't do redraw before shahin,,,, am not sure I fully understand? I will be using equity from current property as 20% deposit on proposed purchase, this would be ok if standalone seperate loan with current bank, not say cba using current scenario....
     
  16. Shahin_Afarin

    Shahin_Afarin Finance Broker

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    I meant if you have a PPOR debt - be careful not to redraw (ie. increase the existing non tax deductible debt) in order to use as a deposit for a tax deductible purchase.
     
  17. ritchie77

    ritchie77 Member

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    Shahin - ok understood... Thanks a lot for the advice :)

    So getting a line of credit of some sorts per what I described above would be ok as a seperate loan... Just not combined/mixed as I know it can get messy.
     
  18. Shahin_Afarin

    Shahin_Afarin Finance Broker

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    Thats it dude - just keep it separate and clean :)
     
  19. ritchie77

    ritchie77 Member

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  20. RethinkInvest

    RethinkInvest Buyers Agent

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    Hi Ritchie,
    I personally own six unit blocks ranging from 3-5 units on the one title. I have also been involved in helping others finance blocks with up to 9 units on the one title.
    I love buying these blocks because you can often strata title them and sell off the units one by one for a profit. They also obviously offer great rental returns.
    Let me know if there is anything specific I can help you with.