Financing through company

[Chippo]

Its been a while since my last post but loving all the info I'm getting from this site so thanks for that

My questions is about financing through a company

The end goal is to be a developer/renovator as a full time job so I wont to find out how I am going to finance these projects without having a full time job (the first few projects will be done with a full time job).

Is it possible to set up a company that I put all the profits of the developments/renovations into and then use that structure to borrow funds?

eg, Say my development profits/renovation profits (what ever project I am doing) and any cash flow form IP are put into a company and it turns over $100k per year. If the company had 2 years of tax returns would this company be able to borrow capital the same way an individual earning 100k per year?

 

[Rolf Latham]

Its been a while since my last post but loving all the info I'm getting from this site so thanks for that

My questions is about financing through a company

The end goal is to be a developer/renovator as a full time job so I wont to find out how I am going to finance these projects without having a full time job (the first few projects will be done with a full time job).

Is it possible to set up a company that I put all the profits of the developments/renovations into and then use that structure to borrow funds?

eg, Say my development profits/renovation profits (what ever project I am doing) and any cash flow form IP are put into a company and it turns over $100k per year. If the company had 2 years of tax returns would this company be able to borrow capital the same way an individual earning 100k per year?

depends

many lenders wont lend to a "developer" on resi terms, and the other one is that if they do, your income might be considered as cap gains which are generally excluded.

Often, there are ways to make it work

ta
rolf

 

[Mick C]

Yes you can...but the bank will need to see some consistency and history....so having 1-2 project under your belt may not be enough...depends on size and your company's corporate ( the ppl) exp


Builders/ developers is probably one of the hardest " self employed" too lend against, as they always have cash flow issues and another issues that may be outside their control ( weather, budget, council)

P.s it sounds easy...but it's not.

Regards
Michael

 

[Aaron_C]

It depends on what you tell the lender

 

[Shahin_Afarin]

The lender would need to see that you have been doing this for a certain period of time otherwise it would be very tough getting it over the line or possible view it as capital gains.

 

[Shahin_Afarin]

It depends on what you tell the lender

What could you possibly tell the lender?

 

[Chippo]

depends

many lenders wont lend to a "developer" on resi terms, and the other one is that if they do, your income might be considered as cap gains which are generally excluded.

Often, there are ways to make it work

ta
rolf

Are most lenders comfortable with lending to developers on commercial terms with 70%LVR?

 

[Chippo]

Yes you can...but the bank will need to see some consistency and history....so having 1-2 project under your belt may not be enough...depends on size and your company's corporate ( the ppl) exp


Builders/ developers is probably one of the hardest " self employed" too lend against, as they always have cash flow issues and another issues that may be outside their control ( weather, budget, council)

P.s it sounds easy...but it's not.

Regards
Michael

Can you give me a rough ball park on time of consistent income?

P.S. I know its not going to be easy, but am defiantly keen for the challange

 

[Aaron_C]

Can you give me a rough ball park on time of consistent income?

P.S. I know its not going to be easy, but am defiantly keen for the challange

Depends on the figures / tax returns and what they show.

 

[Chippo]

It depends on what you tell the lender

Listening....???

 

[Chippo]

Another scenario...

If I buy a development site and developed 3 town house, sold 2 and kept one in a corporate trust.

Numbers look like this

IP worth $500k
Loan 60% LVR $300k
Rent $500pw

Does that trust need a guarantor or because the property will look after its self with cash flow and a decent amount of equity can the trust borrow the funds its self?

Cheers for all the quick responses

 

[Aaron_C]

Does that trust need a guarantor or because the property will look after its self with cash flow and a decent amount of equity can the trust borrow the funds its self?

Yes. Guarantee from trustee / director. No questions asked.

 

[Terry_w]

You will always have to give guarantees. You have to structure things so that these are minimised.

In my work I am often coming across small companies with more than 1 director. One is a family business with dad and 2 sons directors. Business has failled and now the personal guarantees are being called on. There is usually no reason to have more than 1 director.

 

[Chippo]

Ok well that gives me a more to think about

Cheers for the heads up everyone