Forums / Property Investing / Help Needed! / Can not get a $300k loan on my $3M rural property that i own outright

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  • Profile photo of treborsujtreborsuj
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    @treborsuj
    Join Date: 2010
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    I am new to this forum and feeling desperate for some financial advice.

    I am on to my 7th application for a $300k loan, having been rejected by 3 banks and 3 credit unions. I have had private finance approved but at a rate of 10.75%.

    Does anyone have any ideas of where I might get finance at less than 10.75%?

    Please help!

    Profile photo of LinarLinar
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    @linar
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    Surely you are joking.  But on the basis you aren't.  Here is my opinion.  Call me harsh, but I would be listening to what the banks are saying.  If  six financial institutions have rejected your application, maybe its time to rethink your plan.

    A $3mill loan, at even 7% will mean an annual interest payment of $210,000 without paying off any principle..  The annual rental income from the properties is $36,400.  Your entire pension is $15,600.  TOTAL income of $52,000.  The macadamia farm will need to bring in a net profit of $158,000 to just enable you to meet your interest payments.  This will assume that you only eat macadamias and use no electricity or telephone or internet and don't spend anything at all because your entire pension will go towards the interest payments.

    And how does three buildings on a property (with a total rental of approx $1000 pw) increase a property's value by $1.65 mill?

    But again, I assume you are joking.

    K

    Profile photo of TerrywTerryw
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    He owes nothing on the property – maybe he is trying to set up a LOC for further investing?

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
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    Profile photo of treborsujtreborsuj
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    I just read my post (which I will edit now) and I failed to mention that I only want to borrow $300,000.

    Like I said, I’m new to the forum.

    Profile photo of LinarLinar
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    @linar
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    Phew.  I happily stand corrected.  Based on your original post, I assumed that you wanted to borrow $3mil to buy the property.

    What I do stand by though, is my opinion that if six lenders don't want to lend you the money, there is obviously a real risk situation.  Do you really need the money?  If you do, and you have someone prepared to lend you the money at nearly 11%, then maybe that is worthwhile doing.  Provided of course, that you can repay the loan.

    I have several friends using private finance at the moment because they can't go through traditional lenders and they are all paying close to 15% pa.

    K

    Profile photo of treborsujtreborsuj
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    @ Linar, WOW! 15%! That makes me feel much better. Thank you!

    Profile photo of Jacqui MiddletonJacqui Middleton
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    Linar your first post was hilarious, and 100% what I was thinking also!  Good to hear treborsuj is not actually trying to borrow 3mill

    Jacqui Middleton | Middleton Buyers Advocates
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    Profile photo of Jacqui MiddletonJacqui Middleton
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    May I ask: does the bank have a beef with loaning you money in general, or do they have a beef with the macadamia farm idea?  If it is the latter, then why do you want to buy a macadamia farm?  Borrowing against your home to buy residential investment properties might be looked on more favourably?

    Jacqui Middleton | Middleton Buyers Advocates
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    Profile photo of kong71286kong71286
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    Have you considered selling your $3M property?

    In my view, that money could be put to better use, earning a much higher ROI

    Profile photo of TerrywTerryw
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    What about the income from the nuts?

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
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    Profile photo of treborsujtreborsuj
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    The bank won’t lend because of the macadamia nuts (commercial risk in their eyes).

    To cut a long story short, we bought the property (with not mortgage) for $1.7m two years ago from money I had made doing a few small property developments in Sydney. We were very new to the industry and the farm was extremely run down when we bought it. Our initial plan was to move two Queenslanders onto the property in which we would live. We have done this and almost finished renovating them and they really are beautiful. The entire property is stunning. I figured that we would have a nice supplement to our income from the nuts. And, if worse comes to worst, we own 90acres of Byron Shire.

    Unfortunately, the farm was incredibly run down so we have had to pour a lot of money into equipment, fertilisers, groundworks, etc.. So, the books look bad in the banks’ eyes due to this expenditure versus income. The farm is now coming good. For example, in the first year we recieved $34k from our nuts where as this year, being our second, we will receive $124k. Next year is looking even better. So our improvements have been worthwhile and we do not need to spend much at all now in terms of upkeep.

    The problems is that we have run out of money and just want to finish the houses (we are building in underneath one and doing the finishing touches of the other) and do some landscaping and I just want a bit of money to play with. I guess I underestimated costs by $300k, thus needing the loan.

    Profile photo of illuminatiilluminati
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    Sucks that you are having trouble with the money,  But there are a few questions.
    If you are using the property as security, maybe they dont think there is much interest for the land.   If there is sufficient interest in the land out that way, have you thought about separating one of the parcels of land, and selling it?

    Options to get money via that banks, there are some really good online lending institutes, but they all tend to have similar lending criteria, if banks are only offering a high rate, then you will probably come across that with them too.

    You could wait until your farms books show a good income, and then you might have a bit more to work with.

    Profile photo of TerrywTerryw
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    Having a farm like that is one of my dreams, hope it works for you,

    Have you tried Stacks Finance? They can lend up to 50% LVR on farms with rates around 10.75%. I have some details and can forward you a recent email if you need it.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
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    Profile photo of treborsujtreborsuj
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    Terryw – Stacks are the ones that have approved $300k,, it’s just the 10.75% I’m trying to beat.

    Profile photo of v8ghiav8ghia
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    Hi treborsuj

    THe income producing side of thins is what makes your property one that traditional lenders and mainstream 'retail' areas of banks will not touch. THat said, the only two banks I would imagine would look at you would be CBA or more likely NAB – and you will need to go via their agri channels, as the retail side , and likely the business banking side too, will not touvh you with a barge pole – as you have found out.

    All the best.

    Profile photo of Naremburn123Naremburn123
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    Hi treborsuj,

    Would it be possible to subdivide part of the land?

    Is there any part of  the land that isn't used for farming?

    You could sell that part off to help with funding?

    Profile photo of Naremburn123Naremburn123
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    Also,

    Perhaps if you have children, one of them could go gaurentuer?

    Even without the farm, you have properties that have value, and perhaps with a gaurentuer, that could help?

    Just a suggestion.

    Profile photo of treborsujtreborsuj
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    @treborsuj
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    @ Dean, we looked a subdivision but Byron Council will not even consider it as they want to retain the rural beauty of the area. Will have a look at guarantor option.

    @v8ghia – haven’t tried CBA or NAB. Might have a look but we’re leaning more towards Stacks at the moment.

    Thankyou all for great suggestions and support.

    Profile photo of Graeme FreerGraeme Freer
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    @freerenterprise
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    Were there 7 credit scores or were they merely 'scenarios' that were rejected? Looks like you are desperate to banks . My business partner is a lender and we have good finance contacts – happy to discuss options for cheaper rate. Email or phone me if you would like our help. Graeme 0414816408 [email protected]

    Graeme Freer | Freer Property and Finance
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    Profile photo of sonyasalsonyasal
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    @sonyasal
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    You could always accept the current loan that you can get and then refinance in one or two years time when the farm is more financial to a loan with a lower interest rate. If you choose to go this path make sure you are fully aware of any penalties or extra payments required to pay out the loan early

    cheers

    Sonya

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