Forums / Property Investing / Creative Investing / JV with landowner – advice needed

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  • Profile photo of jacstarjacstar
    Member
    @jacstar
    Join Date: 2011
    Post Count: 1

    I'm looking at a property in Victoria to develop into 4 units. I can't afford to pay the asking price for the land (around $1m). The vendors are not in a hurry to sell and potentially interested in a JV. I don't think they have any debt on the property as they built the house in the 50's and have lived in it since.  

    As such I'd like to suggest a JV whereby we agree a purchase price to be paid upon completion of the development (when the first sales settle), and we split the development profits 50/50 (or something). The point for me is to develop the site and make a profit with very little money down. My question is how the details of this scenario work, does anyone have experience of this set up?

    My specific questions are –

    1. How would we structure the contract? as individuals or create an entity to do the development?

    2. When the vendor gets paid out for the land at the end of the development would we still be liable for stamp duty?

    3. I've read that the landowner puts up the land as security for the development loan, then the developer obtains the finance and does the development (and gets paid a development management fee). So, who pays the construction loan deposit and is there a way of doing this without using my money? 

    If anyone has recommendations of a good property lawyer experienced in JVs in Victoria please let me know.

    Thanks.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,173

    1. You could do this a variety of ways, Joint Venture agreement is one. You or your entity contracting with owner of land.

    2. Yes, if there is a transfer in title

    3. this will be tricky as the land is owned by someone else. Likely that it will be messy.

    I am just advising on a vic JV right now.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
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    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of Ryan McLeanRyan McLean
    Participant
    @ryan-mclean
    Join Date: 2010
    Post Count: 547

    Give Terry a call. 14,000 helpful posts later he has proven that he knows his stuff!

    Come to think of it I don't think I have ever seen an incorrect comment from Terry

    Ryan McLean | On Property
    http://onproperty.com.au
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    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,010

    You will not be able to finance a construction loan component without the existing owners being a party to the new loan and that they may not wish to do.

    Couple of considerations but can be done with care.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of oc1oc1
    Participant
    @oc1
    Join Date: 2012
    Post Count: 148

    Generally YOU would need to fund the construction yourself. So a nice chunky LOC would come in handy here.

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