how do i finance this

[mikezen]

hi everyone

this will obviously be a very general question, but i just need to work out what aprox cash position i need to be in to give this a shot

i want to buy renovate, subdivide and build

without to much detail into the specifics, i just want a general idea, i also realise that this a high leverage lend

the equity i discuss is from this purchase

1, i buy a house w subd and reno potential value 420

5%dep, p costs, std = 40k aprox cash i have

reno 20k cash i have

aprox revalue 500, availiable equity from a 90% lend 50k aprox

2, subd costs 25k (used from equity)

3, then how do i finance the build?

if the build is 250k can i use the 25k left in equity as a 10% dep for a construction loan? taking the total loan to 675k? (400+25+25+225)

will the original property i renod be devalued as i have subd the back? or will the whole value of the property increase as the value of land available out the back is realised

if the above is ok and doable, do i need any more cash? how much should i need for a buffer? 15k? what is safe for a 250k build project for blowouts

thanks heaps

 

[DaveM]

Once subdivided, the rear block can be mortgaged as security for your build since you will essentially own it outirght on a seperate title. You will lose some value on the front propety depending on how the subdivision is done and how much yard remains, so you may have to top up/vary your LVR on it based off its end val.

 

[mikezen]

Once subdivided, the rear block can be mortgaged as security for your build since you will essentially own it outirght on a seperate title. You will lose some value on the front propety depending on how the subdivision is done and how much yard remains, so you may have to top up/vary your LVR on it based off its end val.

thanks dave

so for dd before purchase, i would research subd property in my chosen area and see what the land at the back is selling for? if similiar land is seling for 200 then does this mean i may have the full 200 in equity to use as there is no loan this part of the property? then it seems it should be easy to get a 250k loan off this?

 

[Terry_w]

You get a fixed price contract for the build and the bank will lend, subject to all the usual rules, 90% of the value of the land and the build costs as per the contract (subject to the val too).

 

[Aaron_C]

You can get finance for the construction based on the building contract price and value of the land, assuming you qualify. So the numbers you have told us are do-able but I would suggest you have a bit more buffer before you do it.