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From: Mike .


Commercial /home/investing loans?
From: Lesley
Date: 30 Jan 2001
Time: 09:25:41

I have been following this forum and others of the same content for some time now. I have read a lot on IPs and my husband and I are now in a position to purchase our first IP. We have found a set of 6 units in good location -1 street back from CBD . Red brick exterior, concrete block interior (very low main). Deal is as follows:

Purchase price - $300K neg
Rent 6 x $110 x 52= $34,320 PA
Cash +ve from day one including bank interest and expenses.


On approaching 2 major leading banks they have informed us that because it is a block of 6 units on freehold title we will have to go with a commercial loan. Has anybody else had this problem? Is it a problem? Is this the way to go or should we look to other leaders?

We have a lot of equity in residence $300K. We want to finance the whole IP 100%

To avoid paying Mortgage insurance should we take out one loan on the residence and the balance to finance the IP. OR take out the full loan on the IP, pay the insurance and therefore not have the IP connected to the res.? Any advice would be greatly appreciated.
 
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Anna

Reply: 1
From: Mike .


Re: Commercial /home/investing loans?
From: Anna
Date: 30 Jan 2001
Time: 09:48:40

I have had this experience myself however, if pushed, banks can change their policy. If you have no luck getting cheaper rates another way around the problem is to finance as much as possible aginst your home (that part will definitely be residential) and only pay part commercial. This is, however, a fall back position. You may also want to check out the cost of strata titling as this would reduce the rates and also allow you to sell individual flats off should you want to.
 
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NigelW

Reply: 1.1
From: Mike .


Re: Commercial /home/investing loans?
From: NigelW
Date: 30 Jan 2001
Time: 10:53:14

Anna

In Qld at least strata titling a block of flats or units will INCREASE not decrease the rates. For example it would go from about 4500 to 6 x $1200.

Is it different in your locale?

N.
 
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Lesley

Reply: 1.1.1
From: Mike .


Re: Still need help
From: Lesley
Date: 31 Jan 2001
Time: 07:03:00

Thanks Anna for your advice.

As Nigel mentioned I dont think strata title is an option. The loans officer I have been dealing with did try to get the loan through on residential investment terms but to no avail. A bit nerve racking as this is my first IP. I am going to contact a finance broker and see what I come up with .

I have 50k available that I can redraw of my housing loan, use this for deposit. I will approach another lending institution for the balance of 250K to finance the IP. This should avoid the Mortgage Insurance. Any ideas or suggestions for lenders who will finance such a deal using Investment loan options rather than commercial for such?

My husband and I are self employed and do not have a high realised income (33K PA) This seems to be a real hurdle for mainstream lenders. However if the IP is cash +ve I can't see the problem. Where am I going wrong??

P.S. I look forward to the day I can pass on some of my own advise instead of asking. Thanks.
 
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Pierre

Reply: 1.1.1.1
From: Mike .


Re: Still need help
From: Pierre
Date: 31 Jan 2001
Time: 18:46:08

Ah, there you are. I was looking for your post before, and provided a possible solution in a post further up. I asked my NAB banker today if she would finance a whole unit block. 'No problem'.

Try the NAB
 
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Anna

Reply: 1.1.1.1.1
From: Mike .


Re: Commercial /home/investing loans?
From: Anna
Date: 01 Feb 2001
Time: 11:25:51

Hi Nigel

Sorry if I have confused. When I referred to rates I was meaning interest rates not municipal rates. Yes the municipal rates would go up. But strata title are far easier to finance and can sell of indiv if needbe. Some banks will finance up to either 3 or 4 in block. So a block of 8 can be taken to different banks (according to the broker I was speaking to).

From previous posts ANZ sound quite flexible. Rolf can you help here at all?
 
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NigelW

Reply: 1.1.1.1.1.1
From: Mike .


Re: Commercial /home/investing loans?
From: NigelW
Date: 02 Feb 2001
Time: 09:05:06

Ah I see.

I would think that unless you're planning to sell some reasonably quickly the holding costs would be too prohibitive for them to be strata'd.

Also, i think it might raise a GST issue on sale.

By way of analogy I understand that if you subdivide a block of land into 2 new blocks post 1 July 2000 then you have created "new" property ie each of the separate land title descriptions and thus you must pay GST on this supply when you sell. I understand that its not as bad as it sounds and you can get a friendly valuer to give you a valuation as at 1 July 2000 so that you can do some form of averaging.

BUT i'm not an accountant so I'm not sure about the above. However I suspect the same may hold true with newly created units carved out of an old block.

Does anyone have experience with this?

Cheers N.
 
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Lesley

Reply: 1.1.1.1.1.1.1
From: Mike .


To Piere and Gee Cee- Finance for block of unitsHELP!!
From: Lesley
Date: 21 Feb 2001
Time: 14:41:44

Pierre, Gee Cee and anybody else who can help!!! What a drama we have had for the past month. Placed a post on the forum about 3 weeks ago "Commercial, Investing, Housing Loans, regarding finance for a block of 6 units on freehold land 1 title.

Pierre and Gee Cee you both replied saying that both the ANZ and NAB were prepared to do such finance under an investment loan and not commercial. I approached both of my local branches and the reply was the same as the reply I got from the previous banks in the same town (small rural town in FNQ).

I then approached a broker who made some phone calls and enquiries. He came back with an answer that appeared to be very favourable to us. Westpac were intersted (having been told in the beginning that the finance was for a block of 6 units) security fine, servicing fine. Westpac already have the mortgage on our res. Sent of application all paper work etc. Made offer on block of units got it at a good price. Signed contract subjected to finance. Finance approval date being 26/2/01.

Get phone call today from broker saying the same F&^%$ answer as from the first bank. Must take application to Business Unit ra ra ra. Have got extension of finance date from Vendor. Broker still trying to establish deal with WP and also wanting to put in application for another inst. If you have had success with a particular bank branch/manager would you be able to give me their particulars and maybe I could contact them rather than going through the local branch here . This is my 1st IP.

The deal is a good one, good +ve Cash flow. If this deal falls through we will just find another however we would really like to see if we can solve this problem . Comments, advice from anyone would be greatly appreciated. I feel I am running out of time. Thanks for reading this.

Cheers, Lesley.
 
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Gee Cee

Reply: 1.1.1.1.1.1.1.1
From: Mike .


Re: To Piere and Gee Cee- Finance for block of unitsHELP!!
From: Gee Cee Keep At It
Date: 22 Feb 2001
Time: 12:58:01

Hi Lesley.

I know what you are going through.

Just a short run down. I had a great Business Banker at Westpac about 5 yrs back. He could just set up whatever you wanted. Then he went out into the Big World to make some $. Next I had another guy that was OK. Same story. After about 3 Business Bankers I ended up with someone that had no idea and could only ever do what was in the computer. I started looking to re-finance a block of units and a block of townhouses in October last year.

IMB wanted everything else I owned tied in and triple cross colateralized , Etc, Etc, Etc. The Commonwealth would only do it as a commercial venture. P & I over 10 years and again everything tied together. (Sure I just won't eat for 10 yrs)

I eventually got info from this Forum site and phoned the ANZ [131314 I think]. They sent around their Business banker and he set up everything exactly as I wanted it.

Have also just been through the NAB for a LOC and they also have been great. {NAB Investors Choice Package}

I think a lot of the time it is not just the organisation but who you get as the loans officer.

I have had small loans refused or only approved if I do 50 things at one branch. Yet at another branch of the same bank a higher loan has been approved with no extra conditions.

You will most likely find the same scenario.

Happy investing. Just keep at it. There is always another property and always another financier.

Gee Cee
 
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Lesley

Reply: 1.1.1.1.1.1.1.1.1
From: Mike .


Re: To Piere and Gee Cee- Finance for block of unitsHELP!!
From: Lesley
Date: 23 Feb 2001
Time: 10:00:59

Thank you Gee Cee for your reply. Your comments have given me a little more confidence. Don't they just drive you nuts. It's hard to fly with eagles when you are surrounded by turkeys!!!!

I am 36 years old Hubby 38, 3 kids, equity in res about 315K. Self employed for past 10 years with consistant steady growth. Most expenses tax deductable (other than living expenses). Not a large realised taxable income. This is just another learning curve to get around. Thanks for sharing your experiences with me . There is always more than one way to skin a cat.

Cheers, Lesley.
 
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Rolf

Reply: 1.1.1.1.1.1.1.1.1.1
From: Mike .


Re: To Piere and Gee Cee- Finance for block of unitsHELP!!
From: Rolf
Date: 22 Feb 2001
Time: 22:13:33

Hi Gee Cee

Looks like you suffered from the law of "Diminishing returns" - the vanishing personal banker. Of course anyone worth their salt is going to leave the banks middle to long term.

The banks equip them with some useful knowledge and the banker can take this outside and make some real $. A good independent broker will make 2 to 5 times what a bank mobile lender will - any wonder ?

You are spot on about relationships - worth more than a few bob on rates !

Regards, Rolf
 
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Pierre

Reply: 1.1.1.1.1.1.1.1.1.1.1
From: Mike .


Re: To Piere and Gee Cee- Finance for block of unitsHELP!!
From: Pierre
Date: 21 Feb 2001
Time: 20:22:52

I spoke with my banker again today about this exact topic. I wanted to confirm that I was able to go out and spend $$ on a small block of units and still qualify for residential investor loan. No problem was the reply. So long as the block is zoned residential, then residential lending it is.

I spoke with Kim from the NAB in Charlestown NSW 0249456906.

On a similar note, I said to her that pretty soon I thought we would have to transfer our business from Personal lending to Business lending as our level of borrowings, structure etc etc was becoming a bit 'out of the personal lending field'. She agreed that the time would come and that they would handle the transition. So, I spo'se what I'm getting at is don't be afraid of business lending - you will probably find that the terms are more flexible, and provided you have a solid business plan or financial plan (if you don't - start now), then you should find dealing with the business lenders just fine and dandy. Actually, I think I'll start a new thread on this one to get some more opinions ...

Pierre
 
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Lesley

Reply: 1.1.1.1.1.1.1.1.1.1.1.1
From: Mike .


Re: To Piere and Gee Cee- Finance for block of unitsHELP!!
From: lesley
Date: 22 Feb 2001
Time: 07:25:27

Thankyou so much for your reply. I will give her a ring today. I think starting a discussion on business lending would be a great idea. Broaden the horizons. Felt a little overwhelmed by the prospect of commercial, being 1st IP, however, this I am sure will be a great learning experience. Will keep you posted on the outcome.

Cheers, Lesley
 
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Rolf

Reply: 1.1.1.1.1.1.1.1.1.1.1.1.1
From: Mike .


Re: To Piere and Gee Cee- Finance for block of unitsHELP!!
From: Rolf
Date: 21 Feb 2001
Time: 15:02:05

Hi Lesley

Everything that is not absolutely b/w is always on a case by case basis with all lenders. There are some strict basic rules and then there are the guidelines that are exactly that, guides not ruts.

My experience with non strata flats is that the answer from the bank depends very much on the overall deal, how much you earn outside of the IP etc etc, level of additional security, is the IP in A or B grade area etc, self employed etc.

Would suggest that if the IP is a really great deal, take whatever finance is on offer within the given time frame, and then refinance at some later more convenient time. Only of course if the cost diffs between the loans is not huge.

Your broker is probably on the nose with you right now, but you could also look at lite/no docs loans. Likely though that these will be even more costly than commercial rates.

Bit of a bind here ! Sorry not of much more help.

Regards, Rolf

PS what town do you reside in ?
 
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Lesley

Reply: 1.1.1.1.1.1.1.1.1.1.1.1.1.1
From: Mike .


Re: To Piere and Gee Cee- Finance for block of unitsHELP!!
From: Lesley
Date: 22 Feb 2001
Time: 07:32:37

thanks Rolf for your reply. You are so correct. Things are taken on case by case scenario. We do not fit into the standard housing loan category for our residence, eg property size - 54 acres zoned rural.

Self employed. So the banks usually take a little long to mule over the figures and facts etc. I will continue the pursuit. It just becomes a little frustrating. Will keep you posted.

Cheers Lesley
 
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Rolf

Reply: 1.1.1.1.1.1.1.1.1.1.1.1.1.1.1
From: Mike .


Re: To Piere and Gee Cee- Finance for block of unitsHELP!!
From: Rolf
Date: 22 Feb 2001
Time: 09:17:29

Hi Lesley

Stick to it - you will benefit before the end.

Ta - Rolf

[email protected]
 
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