From: Greg Loucos
Hello all
My wife and I have just had a discussion with an accountant who is planning an IP development interstate and have come out of the meeting feeling a little puzzled as to whether the deal is to good to be true.
On offer are new boutique units within a 2km radius of a capital city CBD, offered at a discount rate of $25000 off OTP pricing otherwise in their words at a wholesale price!
That is the carrot, for this you have to provide an up front sum of $100,000 which is used to provide the funds for land acquisition and loans for construction.
This money is lent to the developer who pays you interest of 2% higher than your loan. In effect we would become co - developers. This money is raised with a line of credit using the equity of our home.
On commencement of the building the interest paid to us by the developer on the $100000 is stopped, this money is now used as the deposit for the unit. Prior to settlement a new loan is organised for the full purchase price of the unit and on settlement we are paid back the original $100000 plus the $25000 discount.
Effectively we get to pay back the original LOC and pocket the $25000(or use it for the next IP).
NOW FOR THE QUESTIONS
1 Has anyone heard of this type of deal before?
2 Is this the way blocks of units get off the ground?
3 Is this to good to be true?
My concern is the up front money which they use to help get the project going, can I put a caveat on the development to secure my funds?
A contract/loan agreement will be issued to cover the initial up front money and lay out the details of the transaction, will this protect the funds or do we need to find other ways to protect the money.
Thanks for the help
Regards
Greg
Hello all
My wife and I have just had a discussion with an accountant who is planning an IP development interstate and have come out of the meeting feeling a little puzzled as to whether the deal is to good to be true.
On offer are new boutique units within a 2km radius of a capital city CBD, offered at a discount rate of $25000 off OTP pricing otherwise in their words at a wholesale price!
That is the carrot, for this you have to provide an up front sum of $100,000 which is used to provide the funds for land acquisition and loans for construction.
This money is lent to the developer who pays you interest of 2% higher than your loan. In effect we would become co - developers. This money is raised with a line of credit using the equity of our home.
On commencement of the building the interest paid to us by the developer on the $100000 is stopped, this money is now used as the deposit for the unit. Prior to settlement a new loan is organised for the full purchase price of the unit and on settlement we are paid back the original $100000 plus the $25000 discount.
Effectively we get to pay back the original LOC and pocket the $25000(or use it for the next IP).
NOW FOR THE QUESTIONS
1 Has anyone heard of this type of deal before?
2 Is this the way blocks of units get off the ground?
3 Is this to good to be true?
My concern is the up front money which they use to help get the project going, can I put a caveat on the development to secure my funds?
A contract/loan agreement will be issued to cover the initial up front money and lay out the details of the transaction, will this protect the funds or do we need to find other ways to protect the money.
Thanks for the help
Regards
Greg
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