Forum Replies Created
Hi Corinne,
Have you resolved your insurance issue?
I'm in a similar situation and was wondering how we went about yours?
I got a quote from OAMPS Insurance brokers for $385 for Strata Unit Insurance. But the schedule of insurance cover mentions it as "Broadform Liability". I'm confused whether it covers my common area or not?
Regards,
Kumar
Thanks Barry & Scott for the information.
We too had a "normal" real estate agent look at the place and he also suggested a price for the house and small value for getting the council approval.
Seems better to find a commercial real estate agent and check out their views.
Thanks once again.
Would agree with others, that you won't need pre-sales if its a 3 unit development.
We are talking to couple of banks for a six unit development. Although me & my business partner meet the servicieability requirement for the develop & hold strategy, the bank was 'suggesting" we should get some pre-sales.
We appreciated their advice, because they were pointing towards that fact that, if we want to do more developments in the future, then this would become an issue.
So we said, we won't do any pre-sales, but definately sell some after the development, before we approach them again for the next development. Verbally they said its fine. Will see how it goes…when the actual application goes…..
All the best.
Hi Terry,
Thanks for your insightful comment.
Its quite glaring, that I need to create the family trust and transfer our units into it as early as possible, to avoid the claw back, in the unfortunate event of me going bankrupt.
Regards,
B
Banker wrote:………….
New Trust is established.
Balance Sheet of the Trust shows NIL assets and NIL Debt
Beneficiaries lend the trust 200kHi Banker,
The assumption you have made is that beneficiaries lend the trust. Instead of lending, if the settlor/testator or beneficiary contributes to the capital (not sure of the legal term) of the trust (i,e the amount bequeathed to the trust) and that trust money if used as deposit for purchase of asset, then doesn't it afford asset protection.
We have unit trust. Me and my business partner have bought equal units in the trust. The amount contributed towards the units was used as deposit to purcahse the property at 90%LVR. A trustee company of which me & my business partner are directors were asked to give the Personal Guarantee.
Since it was our first acquisition and we didn't have any other assets for the trust, we gave the personal guarantee. In that sense our personal assets are at risk, if the bank doesn't recover the money from the trust. But my thinking was, once the trust has positive cash flow and property has appreciated, we could request the bank to let go the personal guarantee.
Once we acquire more assets in the trust, we will transfer our units in the trust to our respective family trusts. The family trust could be a discretionary trust, which will help in income distribution.
So I believe we have good asset protection and will potentially have income re-distribution oppurtunity once the family trust is set up.
Your analysis would be much appreciated.
Regards
B
Wow! that makes me nervous.
We are novice in the trade. Hence have to rely on people's expertise.
Will post it in the forum, the results of our efforts to obtain invidual title. I guess its going to take 3-4 months to get the sub-division approved.
Thanks for the help.
Hi Richard,
I rang our Architect/draftsman to double check whether individual title will be issued before construction. He said definately "yes"..
So it looks like its quite possible. Will only know the reality once we actually walk the path.
So assuming we have individual titles for the six lots and the one existing house, is the idea of getting refinance from three banks feasible in your opinion?
Thanks for your help.
Hi Richard,
No..the bank didn't recommend this. Its just we are trying to put the puzzle together to resolve the challenge in financing.
Isn't our going to be a Community title rather than Strata title. Since each house on property is independant and they have common area.
http://en.wikipedia.org/wiki/Strata_title
"Community title subdivisions are not dependant upon buildings. They involve normal survey techniques and can be completed and approved once access roads and services are in place. However, it is common for buildings to be completed on the various lots before the subdivision is undertaken."Don't the big land developers follow the same principle, when they sell house & land package. Even theirs is big block on a single title which they sub-divide and sell to us after developing the common areas. And the banks happily finance it…
Why should ours be different……Richard, please excuse my ignorance if I sound gibberish…just trying hard to make it happen..
Dwolfe…I was told by a draftsman that we can get provisional sub-division even before building the house. But not sure whether that provisional title is good enough to get refinance…
Cheers
Hi Guys,
We've got 2100 sq mtr block of land with an existing 5 bedroom house.
Council has approved construction of six units on the block.
Obviously we'll have issues with financing the construction.
Our solution is to sub-divide the property and will seek refinance from three lenders for say 2 property each. That way they consider it as residential contruction and the land value will form part of our equity. The refinance will be at 80% of land value and then we seek the money for construction. We expect we'll have excess cash, if we manage to get 80% finance.
When we refinance for each lot, the existing financier will partially release the existing title.
The above strategy was formed after reading through the various posts and talking with the bank.
Do you guys think this approach is practical? Is there something else that we should be aware of? Has anyone had a similar experience?
Doesn't this effectively solve the multi-unit construction finance problem?
Your comments will be much appreciated.
Thanks
Hi Ryan,
I've got a 4.5 year old son.
To get him started on his investment education, we've started playing "Monopoly". I let him play the way he wants it, but in the process he becomes aware of the role of bank, holding properties to get rent, auctioning the property to get cash etc.
Its just a beginning…Will definately incorporate Mike's suggestion as he grows older.
All the best.
Cheers,
Kumar
basbog wrote:Couldnot pm you, Ross @ TCB 08 83762299Hi Barry,
Thanks a lot for sharing the contact details. I called Ross and he was very helpful. He has arranged the insurance based on Shared Accomodation. In our case, since we have individual agreement with tenants for minimum 1 year, it wasn't difficult to obtain the normal insurance. I'm very happy with the outcome.
Once again thank you very much.
Cheers,
Kumar
basbog wrote:Bob The BuilderThe 1b normally covers up to 13 people and has regulations like fire escape door and door sets, interconnected smoke alarms, I have 11, lights that come on at the exits with the alarms. My council allowed 10 in my house based in size. Its a bit of work to set up but not to much, anything above 13 then it gets more complicated.
My broker is going over my insurance again hope not to open a can of worms.Barry
Hi Barry,
We will have 17 in total. Hope the classification for us comes out as 1b.
Based on your comments, it seems the insurance companies don't have clarity. They should be asking clearing whether your property classification is 1b or Class 3. If Class 3, then they can decline, and if class 1b, then cover it as CGU has done for you. Your explanation makes perfect sense.
It would be of great help to this amateur builder, if you could share the name of your insurance broker.
Cheers,
DWolfe wrote:Hi,Might be worth ringing an insurance broker who may have access to more info. Might save you the phone calls to each insurance co. Also might be worth ringing a local property manager or 2 and asking them if they know of anyone, if they hand management of something similar they may know.
D
Hi Dwolfe,
Thanks for the suggestion. Eventually ran Financial services Ombudsman and they gave me the numbers of two brokers. Called one of them, and they are in the process of giving a quote. But indication are the premium would in the range of $8000-$10,000 per annum, which is exhorbitant and takes out all the charm out of converting a property into student accomodation for positive cash flow purposes…
Thanks once again.
andlim wrote:Hi,Just wondering how you would define a rooming house… if you have a house that has 7 rooms, and you get the 7 tenants to all sign the lease agreement would that be considered as a rooming house ?
Hi Andlim,
As per the Council Regulations & Consumer Affairs Victoria (CAV), a house with 4 or more unrelated persons where individual agreement exists is classified as rooming house and is required to be registerd. There is a brochure of http://www.consumer.vic.gov.au on rooming house.
If all 7 tenants sign a joint lease, then its not classified as Rooming house, because they don't have a separate agreements.
Cheers
Hi Barry,
I'm only an aspiring builder and will be commencing a six unit development at the back of this Rooming house. So honestly, I'm not aware of the regulations. But taking a hint from your comment, I looked up on google for Class 1b building and understood that its for small guesthouse, boarding house or similar housing.
We recently complied with the council requirements to be registered as a rooming house.
So do we just clearly tell the insurer that it is a Registered Rooming House and hopefully insurers like CGU should accept it.
I'm getting quotes from Insurance brokers, but they are in the region of $8000-$10,000/-premium per annum.
Thanks a lot for your help.
Hi,
Me & my business partner bought a 5 bedroom house in Melbourne and converted it into rooming house. We are also converting the second lounge and the dining room into bedrooms, such that there will be 7 bedrooms.
It is making our IP into +cash flow.
Now the challenge is with the insurance. We are struggling to find an insurer who will insure a rooming house.
Does anyone know of a insurance company that will cover rooming house? Please help.
