I had a dream...

Not quite as granduos as Martins but anyway...

And I still do.

Here goes - maybe someone can help.

Last year I purshased an old house on a large block in Perth with the idea of subdiving and constructing 3 townhouses on it.
All of the feasabilities were good, with returns forecast conservatively at about 22%
Everything was going fine, I invested heavily tipping about $400-500k of personal funds into it. Designed the houses, got my approvals found my builder, got a contract, went to the bank....thats when everything stopped.

Dont get me wrong, I had spoken to the bank prior to purchasing the block and they said they cant approve the finance without a contract, but it all looks ok.

However they couldnt understand my situation which is;
I earn a much larger than average monthly income, as I work overseas, however I am employed by an Australian company. I dont pay tax in Australia, and earn US dollars.
I was seeking finance for 80% of the development (hard) costs + land value. On completion, I have sufficent income to pay all interest costs, once the houses are rented out.
However the banks would only consider the contract price in the calculation and excluded all the money I have already put into the development.
Also they could not understand that I dont pay tax, therefore removing about 40% of my salary. Then the fact I earn USD$ confused them more.
In addition while I am away from Australia I have no living costs as the company pays for all meals, flights, accomodation etc. When I am back in Australia I dont own a car, or have a PPOR - I have no wife, or children (that I am aware of :p) - so in reality have no monthly commitments (other than a bit of debt on IP's).

In effect the banks took my salary, listed it in AUD without conversion (-10%), deducted tax (40%) deducted living costs ($30k), deducted the distance between the sun and Jupitor and concluded that I lose about $25,000pa and therefore couldnt afford the repayments.

I tried to source some funding through the commercial chanels, however, was mostly declined due to a)Im not planning on selling them b)the transaction is too small.

This is my first foray into property development (though I have a couple of other IP's). I can afford the monthly repayments, so its not the end of the world, however, it is affecting my otherwise affluent lifestyle :D

Can anyone shed some thoughts?
 
thoughts? property development financing is a disaster. I would rent the house out and hold out until the banks wishes for higher house prices come true
 
Here is a few question and then will give a view
1 why did you not get a loan in the us on the aust property using the us income and paying the loan there
2 why did you not go with a comm broker
3what's the numbers on the deal land Val/loan. End Val and what was the build costs and what is the margin If sold
4 have you looked at selling to yourself using a company and trust structure
5 r u using an accountant or are the number just your ideas
any spelling mistakes this from iPhone so best I can do
 
Ausprop - thanks, but Im not really good at waiting. I figure there must be something I can do.

Grossreal
1 - I dont actually work in the US, I only earn $USD.
2 - I have my own personal bank manager, hence why I went direct. I am (or was) considered a "high net worth client" so I had direct contact with an individual. She has since left. I have had some bad experiances with brokers, so have a sour taste in my mouth. I also know how the banking system works, for the most part the people processing loans in the broker department aren't at the sharp end of the blade. My situation is not 'inside the box' so it just spins their simple minds out.
4 - yes, but I see little point in doing so. I would have to pay S/D and transfer costs etc. And really dont see how that would alter the numbers at all? (please help me with your thoughts here).
5 - I have an accountant, a project manager, and my brother assisting (corporate finance manager).

3 - numbers
Block value - $750,000 as is (potentially $900,000 if I get the titles issued now, rather than at the end of the project, however means finding an extra $30k now (which I dont have) and will also increase construction costs).
Construction contract $385k/house (x3)
Current loan $550k
End value $900k/house on completion
Works completed to date include all drawings, head works, connections, approvals etc. I am ready to start construction just need the $$$ to do so.

Cheers
 
Like dentists and car mechanics Brokers come in all shapes and sizes. Personal bankers however are always overworked, and usually on their way either to middle management or back to being a teller, I've never heard anyone tell me they have had the same personal banker for more than 18 months or so...
 
Can anyone shed some thoughts?

It should be easy for Rolf to get this one through.

Would the situation be different if you told them that you were to sell 1 or more of the townhouses?
Can you borrow more if you change your address and go and live with your mother (rent free) for example?

Did you ask your bank manager to help you get this one through?
eg, what can you change in your application to meet their requirements?
Sometimes even the credit limit on your credit card can stop you from getting a loan.
Last year I had to reduce my ccard limit to $10K for a few weeks while my loan was going through.
 
hi
here is a couple of ideas and they are ideas not forms of investing or advice
1. you us income is a requirement for some over seas funders ie you can get a us loan if you have us income yen loans are the same yen income so you could get a us loan to fund the properties and refinance out with a local funder have the local funder lined up if the front which gives the security to the os funder.
2 you have said this is out of the box type of fund well not really pm me and I can give you some real out of the box funding this does not even come close this is just that the credit does not understand the deal why because the person presenting it does not understand how to present to get thru credit
3 most people think that because they have done something all the time that thats the best way and usually its the not you need to always find different vehicles or avenues and if they turn out dry gullies look some where else and not in the sameway old saying if something needs fixing or has gone wrong don't look for the cure or the answer using the same way the problem occured look out side the box
4 your deal can be done thru three types of funding depending where this development is I know of three banks that would do the deal.
I know of three private groups that would have no problem with this deal and one is from the us
and If you wanted I know of two syndicates that would do the deal where they take on the deal and split up the site and they fund the whole thing.
one little bit of warning developing is not for the faint hearted and do come unstuck and the 3 to 5 house / duplex is the norm to come unstuck so you have to be very sure of how you are going to solve alot of issues and this can, does and will impact on your 9 to 5 job
developing is not a part time few phone calls and a couple of emails thing
when and they do problem come up they do
take alot of your time.
even turn keys take issues and time and unless you are willing to put in that time and you have allocated it you will have problems and this is the biggest reason I see sites going into big problems
no one steering the ship
the developer want it one way (part time ) and the builder another(charging heaps for the developers changes or modification)
but back to the question
the borrower for the funds and the end owner are usually the same but not in all cases so you can be the ultimate owner but you do not have to be the borrower.
this is the normal way of doing it in larger developments.
the end owner in say a 25 mil construct is not usually the borrower as the borrower sits above the owner they take the risk and also most of the profit and build the project if they go west the owner bring in another person or group to finish so there is a bit more flex in the deal.
this is the type of funding that would spin your managers head if I wanted to but credit would understand.
if you want a head spinner try
land owner
borrower /risk taker
security bond from os bank in os bank and that all the security for the local bank for the deal
presale two group all with os bank deposit bonds and separate banks
and all non recoarse lending from local funder.total build cost 21 mil
is that harder deal then yours
well the above has three local funders already agreed to fund.
if you ask are there incomes in currencies out side of aust
may well be I have no idea
example only and no other info on this deal will be supplied before you ask
 
What I'll never understand is why people will only pay 750K for an older style house on a lovely big triplex block, but are willing to pay 900K for a brand new handerkerchief with neighbours about 20cm away, and everyone can hear everyone else's toilet flushing.....and everything else as well.....makes no sense to me.


Of course, once the developers and builders move out, and the occupants move in, they all scream blue murder cos "we've paid top dollar for this, and those people 20cm away are horrible and we don't like them. We've been to council and they can't do anything. My amenity has been affected !!!"
 
Top