Financing process - first purchase

Hi all,

Just wanted advice on the financing process and its interaction with buying and building on my first block of land.

Paid the deposit and have until mid June to obtain approval for financing.

DOes this mean one needs to have drafted building design plans prior to seeking finance approval? or for the purposes of the property can I just seek financing approval on that portion now,a nd deal with the building portion later?

I assume I shoudl then begin a solid finance broker relationship than DIY finding my own loan product?

Any tips in selecting one, or recommended brokers?

There appears to be so many - how does one sort the wheat from the chaff?

Currently my initial thoughts are to sort by:

1) Educational and current background considerations. Motivation, goals, time in industry?

2) A broker who can independently hunt down and "FIGHT" for a great deal/package. The issue is without DIY searching yourself to confirm, do you just have to blindly hope your broker is scouring the ends of the earth for the cheapest/best product and rate?

3) A broker who will act (important point) as a strategic advisor in regards to financing and structure/strategy. Having seen some of the broker created topics here on building a portfolio, and other questions/threads it appears obviously the strategy from first property onwards is crucial to building your portfolio momentum and achieving goals. So ideally I would like someone with a good head around property themselves, and can act as a long term adviser. I.e. willing to sit down, chat and really explain and educate me along the way.

4) What due process did you go through in selecting a broker? Currently I am looking at discussing with local brokers and seeing who i feel is comfortable and suits the above.

Is it an acceptable/viable thing to seek consultations and strategy/advice with the intention that you are shopping around? Or is this tabboo until you have committed?

I wouldn't want to come across as a time waster but can't see any better way to test the waters with so many brokers out there. I'd really like to establish a relationship with a trusted, GREAT broker to achieve my financial/property goals.Therefore want to get it right the first time around.

5) Do you use local or long distance brokers? Happy to accept a PM if anyone wishes to recommend any great brokers anonymously. I'm sure there are many held in wide regard on Sommersoft for their educational contributions and know how/strategy, so would be great for people to speak up and nominate them :)
 
Hey Saber,
To answer your first question, no you do not need the building plans to settle on a piece of land. Some people genuinely just buy land without wanting to build so that is not unusual to lenders.
When it does come time to build you will need a fixed price contract though.

In regards to your other questions about brokers then I honestly believe you Abe stumbled into the best possible resource. I would say in all honesty do not go to your local broker if your goal is to be a propery investor as majority have no idea about investing structuring. They will find you a loan that fits for THAT PROPERTY without worrying about the next and next. Most of the time though a person can do this themselves and potentially even cheaper through an online lender.
A good analogy is a game of pool, most people just try and sink what they can without any care about the next shot, some better players will maybe add a little spin and light touches so they can get a good look at another shot. A professional however is setting up the next 10 shots and that's what a good broker wil be like.

Regarding intestate or local me personally the best relationships are face to face so I would start with a broker odeon here who is local to you. I am pretty sure every state is covered so you won't have to look hard.

Just a final word, don't confuse rates with a good broker, as I said u can get sharp rates online but that is not the wise thing to do if you want a large portfolio. Once a broker finds the right lender then depending on several factors such as LVR, LMI, total loan amounts.etc then they will negotiate based on that.

Good Luck!
 
1. You don't need to have the building component finalised, but you should have a reasonable idea of how much the construction will cost. The construction loan gets sorted out after you've got a fixed price building contract, but it does need to be given consideration right from the beginning. You don't want to choose the wrong lender buying the land only to find they can't assist with the building; refinancing the land can be expensive.

2 & 3. Engage a broker. It's what we do all day every day and there's a lot more to it than the cheapest rate or simply getting the loan approved. If you intend to build an investment portfolio you need to get it done properly from the start and this forum is full of examples where people thought is was simply about cheap rates but made strategic and structural mistakes that costs big $$$ later on.

4. Take a look at what the various brokers are posting here. Terrible brokers don't survive on this forum. By all means talk to more than one. Also consider how long a broker has actually been in business for and what their long term experience is. Property investment and finance are long term propositions.

5. Distance is a factor for your comfort level, but not a significant problem otherwise.
 
Hi Saber

There's a couple of good broker out west you could chat with - Colin Rice and Jess who post on here are Perth based.

For your construction loan - you can either apply for land + build at once (the preferred approach as it leaves little margin for error) or apply for land first, settle and then apply for the construction loan after.

Cheers

Jamie
 
Hey SaberX - you've got the right idea with most of your criteria.

I think you'll just get a feel for it - have a chat to a few and connect with someone who feel most comfortable with. There are quite a few good ones on the forums (and they've posted above!)

If your preference is local, hit up Colin Rice or Jess first - they're local to you have a sit down if you can. I suspect after talking to either of them your search will be over, but if not, you can expand from there.

Cheers,
Redom
 
Albanga, thanks for your input. Are non-fixed price building contracts common place or available? Provisional sums are largely only site works related from what I see?

Your analogy is completely correct. I wanted to focus indeed on someone who can add not their 10 cents, but their $10 worth to 1) How to structure properly for NOW and the future - how will I get to and improve my financial situation and goals in the future. After all, we all want to make the most moolah as investors 2) Advice, hints and tricks about the financing and building process through their line of work. There seemed an abundance of 'big name' brokers... but I had my doubts that these banks and mass radio/tv marketed brokers were cookie cutter brokers who just choose you a product for their and then. I want someone with a personal relationship in guiding and teaching me.. not just presenting me with what to pick. I love to learn and want to be taught/guided.

Coming from a finance background, I work in the accounting industry and previously public practice (accounting firms). My worry , like any accounting firm is without a very deep industry knowledge/experience, the everyday customer has no idea 'what their missing, without knowing what there is out there'. IN other words, choosing a broker wise how can I best choose the right broker without knowing what 20 alternative brokers would have done in a parallel universe?

Any advice on this regards? Or must one just meet, hear their advice, strategies, and accept at face value that this and the product advised is ultimately the best thing you'll get, and hopefully as good as the top 10th percentile of brokers would similarly advise?

@Peter - good advice.

Re: 1) - i assume this is where albanga's last point comes true - the broker (a good one) will find the right lender before the most cut throat rate, to ensure that indeed come construction loan stage you will be looked after , having previously purchased the land.

2&3 ) I'll take your advice at full value that there is more to choosing the cheapest product. I guess even as accountants/finance industry, many do the same and do not understand the true value of work that goes on behind say just punching out a tax return or financial statements for your entity.

4) The issue is how does a non-broker background differentiate between gold and charcoal advice from various brokers? Short of someone calling them out.

Comes back to my above point - just how to properly gauge how qualified your broker is?

Would you put a qunatitive rigid cut off on 'years experience' in the broking industry? OR could someone who just started their broking business i.e. 1-3 years, be appropriate if they have skin in the game (property investment wise) or a seemingly good knowledge of strategy/advice to assit you?

5) Happy to skype or phone call if that gets the job done. Face to face is preferably but obviously in Perth we are more limited by geographical size as to number of choices.

My intention was to contact a few eastern states brokers on here (if you get a message then you know why!)

@Jamie - thanks for your input. Is the margin for error materially higher splitting the two loans? Finalising building plans for a first time build (given the knowledge gap to figure out what to do/build and what i need to get rental appeal in my area) in time for financing by june would otherwise be somewhat rushed. Being a first purchase I feel a full DD is needed to ge tit right the first time as best I can.

I have contacted Jess previously, will see what Colin has to say. Any other WA /Perth based brokers you or others would recommend on the basis of the quality of their work and knowledge/advice?

Happy to receive PM's for anyone wanting to remain obvious feedback wise. I would also ask for eastern states recommendations, but don't know if it is appropriate given the background of everyone applying.. awkward? Happy to accept PM's or for anyone not afraid to speak up, even if for your own name to be put forward.

@redom:

Thanks for your local suggestions. Are these based on quality of knowledge and experience, i suspect?

I plan to meet and talk where I can to see wher eI feel most comfortable. Again, my biggest concern is you may be made to feel comfortable, but what questions or tips would you recommend I ask to gauge the level of knowledge and quality of the broker above just 'suggesting a product'. Or is it blind faith that you will not be missing out on any quality advice that you never know you're missing out on in the first place?
 
Also, is it etiquette wise fully acceptable for one to shop around when first trying to engage a quality broker? DO you all get frustrated or generally accept that sunk cost in providing tailored meetings and advice/strategy, may not always convert to a client?

Just wanted to go about the process in the right/respectable way.
 
If the objective is to simply purchase this property and be done with it, then the most important thing is to get the loan approved, the second most important thing may be to get it at the cheapest cost (which can mean rates, but also fees).

If you're going to aggressively build an investment portfolio, then cheap rates should not be a priority at all. More important is how the lender you're choosing will fit with what you're wanting to do for the next purchase, the one after that and so on. If you want a cheap loan go with Suncorp. The problem is that you'll probably find yourself doing an expensive refinance to another lender the moment you want to access equity from your first property. This will likely cost you way more than the amount you save from a cheap rate.

It's like telling me to use a good accountant who can properly advise on my personal, IP portfolio, asset protection and business structures, as well as tax planning. I know I can simply go to the ATO portal and do it myself and not have to pay the accountants bill. Surely doing it myself or using H&R Block will save me heaps? ;)


In context of how many years experience a broker should have, consider that we've seen cheap rates and favourable lending conditions for over 3 years now. Do you take advice from someone that's only experienced good times, or someone who's been through multiple market cycles? It doesn't hurt to have owned property through the good and the bad either.


The question of should you split the loans between land and construction, vs. package it into a single deal depends on the lender and how the actual execution of land purchase an then construction proceeds. The difference between the two is fairly immaterial. The best solution depends on how the problem is structured, which is probably something you don't know at this point.


It's always best if you can have a face to face meeting, Colin or Jess are the two obvious places to start. If you're not confident in what you're hearing (and I don't see why you shouldn't be confident in their advice), by all means search further. Nobody likes having their time wasted but you've also got to be confident in the people you're working with. There's no easy solution to this problem.
 
In answering your other question then yes there is what is known as a "cost plus" contract which is basically the cost of everything plus the builders margin (say 20%).

Unless you know what your doing though then this is fraught with danger mainly because you really have no idea what the end cost is going to be! Yes with a fixed price there is other costs such as site works that cannot be factored into the contract but this is far less risk than having no idea at all what the end figure is going to be. Now because of this a lot of lenders to my knowledge will not touch this kind of contract (brokers can shed more light).
 
Thanks Jess, I'll have a read tonight. :)

@Peter:

WIth your suncorp example, is the issue with accessing equity refinancing due to their reluctance to redraw equity and issue out further loans on a property? And hence why you have to pay extensive fees to refinance with another external lender? Just trying to understand the situation as obviously I am no tfamiliar with different lenders and I am sure this background knowledge would easily explain your example.

Not exactly with the accountant example (proper advice still falls under financial planning and said requirements) - but smart ***'ness aside, you are right. AN accountant does plug numbers in and lodges it : similarly done via the tax portal or your H & R block, but a good accountant knows what to claim (arguably higher quality/more extensive than a H & R block alternative) and provides additional thoughts (skirting around the fact that formal advice is legally not allowed) on other aspects of structuring, investment and general financial advice. In that sense that is what I'm looking for in a broker, so agree entirely with your comments. Given my background I could probably (albeit the time cost) logon and search for the lowest deals, and negotiate, but need the strategic input and also industry knowledge that a good broker brings to the table: lenders to avoid, products and must do's, must avoids etc.

Sound sense re: years of experience. I assume you wouldn't completely discount someone with a good head screwed on but with less grey hairs to have gone through several up and down property cycles?

Re: splitting loans or combining, yes I assume a good broker will cycle through this and assess where i am at with the building design stage to determine what lender to choose, followed by product, and then lastly the rate/fees in minimising costs?

Fully agree with your last point. That said, on a side note is Perth only represented by Colin and Jess? Hopefully we aren't that small a market in terms of brokers! Or at least i assume reputably knowledgeale/good brokers given their names are the only ones thrown up atm.

@albanga:

Out of curiousity when would one take the more uncertain route of going cost plus? I assume the plus margin is potentially lower than a fixed price if you accurately know future costs, and hence why someone would go down this route?
 
Would a good broker touch upon side issues such as income protection (for those without one already) given you are dealing with the financing and repayment side already?

I've also been reading the "effortless empire" free book I got from Chris Gray at one of the trading and investing expos a while back. Interesting points about interest only loans in terms of boosting your disposable income left to finance a second future loan... just curious if you can find an interest only repayments loan, that has the option to make principal repayments in addition?

Likewise i assume no bank would ever be crazy enough to offer a fixed rate with some flexibility to make additional repayments?

Although I do take the book with a grain of salt as it seems heavily influenced towards property, with some examples fairly good points BUT overlooking the flip side negatives when things arent so cherry rosy. Some (i would say) unfair comparisons between asset classes like asset and shares in terms of leveraging (I still don't believe it is valid comparing $100k equity leveraged only to $200k in shares, versus 100k leveraged to 500k in property - obviously a larger base is going to return you more in absolute dollars. I would be more concerned with the % return , with the ability to leverage more a qualitative factor to consider instead) but i'll not detract the thread any further. :)

THanks for the advice to date.

P.S. Out of curiousity - is it blind faith that a broker is independently presenting the final product based on the best strategic plan for the client, as opposed to the larger kick back? I assume brokers on here are obviously more ethical in this sense than cookie cutter brokers in the main broking organisations. Are there any regulatory 'act in good faith' clauses similar to the financial planning industry in recent years?

How do you brokers feel about formal qualifications in assessing choice of broker? Do you have a minimum in terms of diploma/certificates in which you would personally rule out using another broker?
 
Heya, answering a few of your questions

1. I'm sure Jess and Colin aren't the only two brokers in Perth, they're just valuable contributors to the forums. If you search through other sources you'll likely find other great brokers in Perth. Given distance, i don't personally know any out that way though other than those two. :)

2. Re commissions, definitely test why your broker is recommending a product. There are differences in commissions between banks, these can add up significantly over a number of years, as the largest differences is often in the 'trialling' commission we get paid in years 3, 4, 5, etc. Higher trialling commissions in later years can reflect in a higher 'value' for a mortgage broking business. E.g. NAB tend to pay a more than the other Big 4. Depending on the strategy/goals of the investor, it often makes sense to leave them till later in the IP accumulation phase - but i've lost count of the number of broker originated loans i've seen for clients that have used them very early (and have their loans crossed). I'd guess that broker incentives may have played a part, at least to some degree.

3. Keeping flexibility to do equity releases is definitely important. Generally involves a couple considerations including: your borrowing power with that lender, and the lenders policy for equity releases. Some ask lots of questions and want verification, others are easier/simpler.

4. I said this in Jess's post about brokers, but i think experience does make a difference. Its not a be all, end all - but you definitely pick up more and more knowledge the more loans you write and the more scenarios your deal with. That said, its not as simple as time > talent. You'll be able to tell pretty quickly if your broker demonstrates the knowledge/know how you require. As a young broker in the industry, its definitely a challenge that new entrants need to confront/deal with. Nonetheless, with the know how/desire/business acumen to exceed clients expectations, younger/less experienced players can not only survive, but thrive in the industry (i've just been reading about a 26 year old duo that would likely be writing more loans than of all the reputable brokers on SS combined, pretty inspirational stuff.)

5. Re education, broker education is almost entirely practical. The diploma/cert iv - they don't really teach you much apart from the basic structures/regulations/etc. The knowledge and how to be a good broker isn't done via courses, its done by meeting clients and solving problems. Hence some experience writing loans is important.

Good luck with the search!

Cheers,
Redom
 
Would a good broker touch upon side issues such as income protection (for those without one already) given you are dealing with the financing and repayment side already? Yes, generally as part of overall risk management

I've also been reading the "effortless empire" free book I got from Chris Gray at one of the trading and investing expos a while back. Interesting points about interest only loans in terms of boosting your disposable income left to finance a second future loan... just curious if you can find an interest only repayments loan, that has the option to make principal repayments in addition?
In this situation, we'd put you on IO payments, and anything extra you wanted to contribute would go into your offset account. This reduces interest payments the same as extra principal repayments would, except they aren't in the loan which makes them more easily accessible and gives more flexibility from a tax perspective.

Likewise i assume no bank would ever be crazy enough to offer a fixed rate with some flexibility to make additional repayments? Some do. Many let you repay $10 - $20k or so, others will give you an offset. Varies between lenders

Although I do take the book with a grain of salt as it seems heavily influenced towards property, with some examples fairly good points BUT overlooking the flip side negatives when things arent so cherry rosy. Some (i would say) unfair comparisons between asset classes like asset and shares in terms of leveraging (I still don't believe it is valid comparing $100k equity leveraged only to $200k in shares, versus 100k leveraged to 500k in property - obviously a larger base is going to return you more in absolute dollars. I would be more concerned with the % return , with the ability to leverage more a qualitative factor to consider instead) but i'll not detract the thread any further. :)

THanks for the advice to date.

P.S. Out of curiousity - is it blind faith that a broker is independently presenting the final product based on the best strategic plan for the client, as opposed to the larger kick back? I assume brokers on here are obviously more ethical in this sense than cookie cutter brokers in the main broking organisations. Are there any regulatory 'act in good faith' clauses similar to the financial planning industry in recent years?
in reality the differences between lender commissions is so small that it's not really a concern - but when it's an issue for my clients, I'm always happy to let them know the commission for the various banks. On the other hand, some brokers will try and sell you OTP property which lands them a nice $14k commission - I'd avoid them, ideally.

How do you brokers feel about formal qualifications in assessing choice of broker? Do you have a minimum in terms of diploma/certificates in which you would personally rule out using another broker?
Minimal, in my opinion. The minimum required is the Cert IV, and the diploma comes after that and is optional. They really add nothing to define a good broker from a poor one. Which course they've done would be lowest on my broker checklist.

Answers in red :)
 
Someone more experienced with building may take this option but again speak to a good broker but as far as I know most lenders will not touch this.
It also makes the builder somewhat accountable, as at the end of the day no matter what they get paid their margin. With a fixed price they have prices and deadlines to stick to because if they go over then they are the ones who lose money. With a cost plus then who cares if one of the trades throws a suprise your way, it's your problem, not the builders.
 
Someone more experienced with building may take this option but again speak to a good broker but as far as I know most lenders will not touch this.
It also makes the builder somewhat accountable, as at the end of the day no matter what they get paid their margin. With a fixed price they have prices and deadlines to stick to because if they go over then they are the ones who lose money. With a cost plus then who cares if one of the trades throws a suprise your way, it's your problem, not the builders.

There is very few banks that will allow a cost plus contract though - none that I know of but I'm not a broker. They all want a fixed price contract - it is allowed that a fixed price contract will have some Prime Cost and Provisional Sum items.
 
@Redom

1. Understood. i Guess SS feedback is the only social peer feedback i have in finding a great broker - generally don't have any family or friends to source recommendations from so it would make finding a good broker harder via cold calling or google searching, unless I knew exactly what to test/catch them on. Also, the feedback of other brokerse and SS members here at least who have been tuning into brokers such as Jess and Colin's advice at least paints a picture of their reasonable regard in the community in terms of knowledge etc.

2. Understood. I can test the broker on why a recommendation is made. Is there any recourse legislative wise or through industry accrediation/bodies where representations have to be backed up in writing or can be held to the broker should down the road you find they misrepresented facts or otherwise made recommendations that weren't true. I.e. any broker can make up favourable reasons for why they're recommending a product over others or disguise (albeit more malicious) purposely the true commissions received. THis of course would be a worse case scenario, but I'm sure it happens (as it has in the fin planning industry).

By the 'trialling commission' you mentioned... if I understand this right you are saying the intiial years are low, but there is incentive for brokers to keep clients with a bank's products for extended periods due to the larger kick backs which roll in once the bank has proof that the client is sticking around for more than the first 3 years?

A good broker would therefore discount and ignore the fact that a client could refinance in two years time using the recommended product if it suited strategy/circumstances better?

I may be misundestanding the trialling commission explanation given your explanation of broker loans utilising these commissions early was lost on me. I may have missed something/understanding how this product/commissions work relative to the impact on net financial circumstances of the client.

3. So part of flexibility considerations for equity releases when setting up your initial loan by a good broker would be to consider a lender that allows favourable redraws of repaid loan amounts or increases in equity when refinancing to purchase a second/additional properties?

In general is equity redrawing restricted to 80% of the valuation of the house value? Otherwise I assume LMI will be lumped onto your existing mortgage - or would they outright reject you?

SO as part of your strategy you would estimate the likeliness and ease of which you may need to demand future equity releases?

On strategy - what do you brokers feel is your role in working with a client's property strategy or lack thereof? If a client lacks, do you work to establish a portfolio/property strategy, so that you can then go for a reasonably safe/versatile accompanying financing strategy?

Or is the portfolio strategy something which you keep your hands out of and require a client to have a reaosnable clue of prior to seeing you and you being able to develop an appropriate finance strategy that best suits the estimated future intentions of their property plan?

4. Agreed with your points. Do you have a checklist of questions you as a broker's inside knowledge, would use to quickly determine the extent of your broker's knowledge despite lack of experience/time in industry? A PM would be great if suits.

Would love to read the 26 year old duo story too if you feel like sharing. Sounds like a great tale.

5. Thanks for your responses.

@westminster - fair enough. What are some 'prime cost' items in a fixed price building contract. Obviously provisional amounts would be site works. And fixed amounts I assume would be the general cost for certain elements - slab down, internal walls, roof? Or do they break things down finer in to costing for individual material types etc?
 
Answers in red :)

"In this situation, we'd put you on IO payments, and anything extra you wanted to contribute would go into your offset account. This reduces interest payments the same as extra principal repayments would, except they aren't in the loan which makes them more easily accessible and gives more flexibility from a tax perspective."

That is a good alternative. I thought that may be possible but hadn't confirmed it. Is there any pro/cons why someone would not go down this route rather than a principle and interest loan , as the net outcome would still be the same in terms of your offset account would reduce interest payable... and you'd be 'notionally' reducing and paying off your principal. But with the added advantage of lower cashflow? Or is this just a no brainer that many mums and dads miss out going their own traditional DIY loan route or a cookie cutter broker?

I had a further question to the SS brokers here, and that was whether the 20% deposit to avoid LMI was affected by interest only loans i.e. given the lower servicability requirements per month, can you get away with a higher LVR and still avoid paying LMI?

I am looking at a 20% deposit and may be short of 10-15k... it doesn't make sense that when i can get this money back in a few months of work that I have to take out LMI and pay another 10-15k out of pocket that is basically dead money. Just wondering ways around this.

Also when is the 20% deposit assessed on the basis of if you bought land at settlement, and then needed a construction loan . YOu would be progressively drawing down on the counstruction loan - would they require you to demonstrate 20% cash deposit before approval? Or is it just up to you to meet the cash requirements as they fall due (if you nominate in your application you plan to stump up 20%).

How also does the FHOG of $10k for new properties, as well as stamp duty exemption come into play with my 20% deposit and the loan?

I assume the 10k FHOG is paid upon settlement? Or like stamp duty refund concessions for first home buyers, do you only receive both after 6 months of living in the house?? In which case that would put me a further 20k ~ out of pocket in terms of an available 20% cash deposit?



"Some do. Many let you repay $10 - $20k or so, others will give you an offset. Varies between lenders" - Interesting. DO you feel you can beat the bank in their yield curve estimations, or that a fixed rate will always be 'on the ball' and designed in the longer run to be favourable if not neutral to the bank versus going a variable rate. Particularly in the low interest rate environment now.

"in reality the differences between lender commissions is so small that it's not really a concern - but when it's an issue for my clients, I'm always happy to let them know the commission for the various banks. On the other hand, some brokers will try and sell you OTP property which lands them a nice $14k commission - I'd avoid them, ideally. "

I see - well that makes sense where going for finance lands you a potential property sale, that something smells. Still, sounds like unlike the financial planning industry there is no regulatory pressure of 'acting in good faith' that can be used to take precedings against shoddy recommendations or bad product advice based on a lack of independence?

"Minimal, in my opinion. The minimum required is the Cert IV, and the diploma comes after that and is optional. They really add nothing to define a good broker from a poor one. Which course they've done would be lowest on my broker checklist."


WHat is your opinion on industry body's accreditation? As some brokers list their organisational membership etc. DO you think this adds any credence?
 
One thing the effortless empire book omitted, which I picked up in a brief flick through the "0-350 properties in 3.5 years" book, if any of you have read, was the use of entity structure.

Just curious from a general pov what most brokers would advise. Having signed my offer and acceptance through my own name , would I have been better off starting my journey through a trust structure? Coming from an accounting background it isn't hard to set one up (not that I can entirely remember or would feel comfortable regulatory wise tackling - a good accountant has a whole myriad of trust law issues that have come into play in recent years, and I would fall into the ordinary/bad accountant genre of knowing the basics) nor is it hard to keep track of your financial statements or ITRs... but it is still a reasonable cost for your first property or two to run it through a public practice firm. Not to mention setup costs.

I'm also unable to recall the implications of a net loss being distributable to beneficiaries. I assume so, otherwise the loss of negative gearing tax implications for individuals would be shot. I'm probably confusing this with distribution of a net loss where no income is distributable.

Can I still settle or change (upon discussing a strategy with my eventual broker) to accomodate a trust entity for example. Income sharing /smoothing isn't my main concern at this stage, but the added benefit of asset protection sprung to mind. Don't intend to do anything risky but I guess no one knows if they'll be sued or be legally liable for a large amount....

Or can i simply leave the first one or two properties in my name, and without difficulty when the time arises setup a trust entity, from which future property is purchased under? Will banks allow you to redraw equity from a personal loan on property held under individual name, to fund a property held under trust?

I assume there is no issue in crossing underlying ownership structures with the underlying finance, so long as each loan is backed by its own security , which they would?

Or will this cause me considerable problems if I start with this in my own name.
 
Just to be different, I'm going to suggest you get a full fixed price build contract and get a full loan approval before the finance clause on the land expires. There's quite a few reasons for this, the main one being the risk of unforeseen costs when building, but also bank valuation risks etc.

You cant get a good idea of building costs until you actually hold a signed contract. Builders give quotes all the time, and like estate agents, they quote a cheaper build, and as the process of preparing the contract goes, the costs increase.

The bank valuer will have a different method of valuing vacant land, than a house and land. So if you are after a house and land, that's what you need to get valued. In my experience I have regularly seen valuations returned below contract price. If you haven't yet committed to the land contract this is an issue. If you have already bought the land, its a major headache and for some means having to offload the block at a significant loss. Its just not worth the risk.

Its also cheaper getting them done together with most lenders, and if you are borrowing with LMI, it can make a big difference to the funds to complete with a lot of lenders than if you do it in two transactions.

Finally, having the building contract and approval done upfront means you aren't wasting time once the land settles waiting for the builder to start, or the bank to finalize the approval etc. This is time where you are paying the mortgage on the land and rent where you are living.
 
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