Finance serviceability

From: Felicity W.

Hi all
This is actually a question about my sister (who will hopefully join us here soon!!).
She's single, in her 30s, and is an architect.
She built a 3 storey place in Richmond, Melbourne, and sold it for a tidy profit.
Now she's bought a house in Mt Waverley which she's done up a bit and lives in (and so could get a higher valuation on it) and also another house nearby which she plans to relocate and develop the land for 2 townhouses. One she will sell for about $50k profit, the other she will rent out.
My question is this - at the moment she is between jobs, and can see that if she focusses on developing properties like this one, she will earn a decent income and be doing what she loves to do. But banks won't touch her with a ten foot pole without a job. Even contracting isn't good enough.
Has anyone out there been through something like this and have some suggestions or ideas on how the heck she can continue down the path of being a property developer without having to go back to work purely to make a bank happy?
Keep smiling
Felicity :cool:
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Reply: 1
From: Paul Zagoridis

It's probably too late but...

I always recommend getting the loan approval for the next deal while still working, THEN quit.

If it's too late for that then get a good broker. They have rapport with the financiers and can steer things (some even perform MINOR miracles).

She almost definitely should be structured as a business entity. Individuals quitting jobs to become Donald Trump scares bankers for some unfathomable reason.

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Reply: 1.1
From: Jude H


If Felicity's sister gets the loan and then leaves work she has the loan to proceed. What happens when she wants the next loan? She faces the exact same situation again??

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Reply: 1.1.1
From: Paul Zagoridis

But then she is a property developer with a track record

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From: Victor Mann

There are many other loan facilities some through banks that deal with developers and others that are simply asset lends most will only provide up to 75% of the project costs
If u require any further info or a more detailed assessment i am quite happy to help.
Yes i am a broker!!!

Good hunting

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Reply: 1.1.2
From: Victor Mann

jude your email is still not working your address may be wrong
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Reply: 1.1.3
From: Victor Mann

hi Jude thanks for your enquires

Banks view on developers is the same as any loan...can the entity borrowing the funds sustain serviceability. As a business enterprise you would need a minimum of two years business history to show the bank that your business has consistent profit to sustain a new project.

If you are doing this on an individual level a number of lenders will lend upto 76% of valuation without financial confirmation ie Self assessed. or Using equity in one property to provide deposit for next one and the lender to fund balance

There are many schemes out there( Ie henry kaye type) that profess to avoid this far I haven't found a bank that will lend without suitable serviceability levels. If you do let me know
So in answer to your question the missing peace is serviceability.banks will allow upto 80% for rental income to be used if you intend to keep the property as an I/p.

hope this helps
if not call me on 0418511699

Good hunting................

On 6/2/01 1:52:00 PM, Jude H wrote:
>If Felicity's sister gets the
>loan and then leaves work she
>has the loan to proceed. What
>happens when she wants the
>next loan? She faces the
>exact same situation again??
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From: Paul Zagoridis

Thanks Victor for clarifying the serviceability issue.

I was too flippant with my last two posts in this thread. On re-reading them I realise I gave the impression that it was extremely easy to set up. It is not. Banks are prudent lenders.

Obviously, I've forgotten that I'd already had two years trading history to show my bank and a track record of profitable deals.

I'd also advise putting a team together to save time and money. A team made up of finance broker, lawyer, accountant and (maybe) real estate agent who know you and have worked with you can save you a fortune in time and money.

Your accountant can advise on timing the quit to full-time developing and in conjunction with a broker can structure your finance so you can live off the developments.

I'm sure Gee Cee Cee has some good points on this issue too


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