Structuring subdivision build
Question from bevan updated on 24th May 2017:
I currently have a rental property in Gisborne which is on land sub-dividable 1HA. I purchased it using the equity in my Auckland house. I plan to subdivide the Gisborne property and build eight houses on the new sections over the next three years. I then plan to rent the new builds out, rather than sell them. To do this, I would like to get a one-off revolving loan of $400,000. What is the best way to do this? My current loans are fixed till April 2018 at the same bank.
Our expert Kris Pedersen responded:
I would recommend having the new properties with a different bank than your Auckland home. You should also take advice on what sort of structure you are best to own these properties in. If set up properly you should be able to be exempt from the Reserve Bank’s LVR restrictions because of the new build nature of your venture.
Do note that potentially you may be best to split the lending and construction over a couple of banks as this is likely to mean you can then stay in retail / business banking. Conversely, if you do it all through one bank there is a strong probability you may get moved to commercial banking.
Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies. www.krispedersen.co.nz